So you are in your 30’s and 40’s, busy setting up your household, buying homes, raising children and building careers. You certainly have a lot to do. Due to your extremely busy lifestyle, you may not take the time to think about one key topic that could shape your entire future. And that would be, your retirement. Retirement planning usually does get pushed to the side during working years. Some people just rationalize the avoidance of retirement planning by the fact that their retirement is 35 years or more away, there’s plenty of time to plan for it, right? Well not really. Your working years go by so fast and if you aren’t careful, you could be destroying your retirement by not giving it some immediate attention.
If you do not take the necessary precautions during your working years, you may be forced to extend your working years. You mean work longer? Yup. If you are destroying your retirement by not planning for it, you may have to work for a very, very, very long time.
5 Ways To Save Your Retirement
1 – Avoid Debt During Working Years
Debt is a waste of money
If you over extend your credit, spend more than you earn and end up with too much debt, you are going financially backwards instead of forwards.
You only have so many working years to pay off the debt you have accumulated. One of the worst financial positions you could put yourself into is to enter retirement in debt. When you retire, your income stops so where will you get the money to pay off your debt? Another disadvantage of debt is that while you are in debt you are wasting large amounts of money on fees and interest charges; money that you could be investing into your retirement plans.
2 – Avoid Winging It
You will not get a do-over
If you are making up your retirement investing as you go along you will be in for a huge surprise at retirement. It is a bad financial move to guess at how much retirement income you will need.
There is no do-over, once you reach your retirement years your working years are pretty much over. Your working years (20’s through 60’s) are for the purpose of saving for your retirement years (60’s through 90’s). Once you hit your retirement years your stream of income usually stops completely; all you have to rely upon for retirement income is your retirement investments. Once your paychecks stop, you can only hope you invested enough into your retirement plans. Use a retirement calculator to determine how much money you will need to live on during the second half of your life (your 60’s through your 90’s).
3 – Over Fund Your Retirement Plans
Too much retirement money is not a bad thing
If you are living from pay check to pay check, the usual outcome is to have zero money leftover to invest. That is the exact opposite of what a financial planner would advise you to do. Financial planners would suggest that you follow the practice of saving first and then adjust your spending according to the money that is leftover. Don’t wimp out and not invest at all because you think that only large amounts of contributions to your retirement plan will make an impact. The amount of money that you invest does not have to be large amounts of money; it all adds up, a little at a time over the long run works great.
4 – A Retirement Calculator Works Wonders
Target Retirement Age, Retirement Income, Time Horizon
To determine how much you should be saving, find a retirement calculator that works for you.
Retirement calculators are designed to give you an estimate based on your target retirement age, amount of retirement income you want at retirement and your time horizon. You can input different information to get different results. Play around with those calculators. You can change the ages or time horizon to find out the different options you have.
5 – Take Full Advantage
Free money, free money, free money
Do not miss the opportunity to take full advantage of work place retirement plans. Retirement plans were designed with you in mind; to help you invest for your own retirement, get free money and get tax advantages.
The tax advantage is that you get to defer paying taxes on your retirement contribution money until you retire…20 or 30 years from now.You can get free money if your employer offers a matching contribution. If you max out your retirement plan contribution, and your employer matches, you get more free money. If you still have enough money to invest after maxing out your 401k retirement plan at work, then open a Roth IRA which also has tax advantages.
You Decide, No Pressure
Your money, your retirement, your future. It seems like it’s all up to you…it is. You get to decide what kind of financial future you want to have. The financial decisions you make today about credit, debt, spending and saving will impact your financial future. If you make good decisions you avoid destroying your retirement. If you make decisions that work against you, the outcome will have long-term effects.