How to retire? That’s a good question right. As a financial planner it’s a question that I get asked by clients at least once a week. I wish there was a one size fits all answer to the question on everyone’s mind, but just as your budget and spending habits are personal so is how to plan for retirement.
Although there’s not a unique answer to the question how to retire? there are some strategies that everyone can do to help them achieve their retirement goals. The differences for each person, couple or family will be in the minor details.
Here are four ways how to retire happy:
Start saving earning
If you’re in your 20s or 30s you may not even be thinking about how to retire, it may not even be on your radar. However if you want to stop working some day you need to learn how to plan for retirement. Unfortunately retirement isn’t magic, you can’t just wake up one day at 65 years old and stop working. It takes time and planning to retire happy.
Start saving right now. If you don’t have automatic transfers set up from your checking account to your retirement savings account it would be a good idea to log into your online banking and do it now. Even though you probably have a lot of other goals that you want to achieve before retirement, such as buying a home, it doesn’t mean that you should avoid your retirement account. Starting to save as early as possible is the best way to help you retire happy.
Be smart about diversification
Don’t put all your eggs in one basket when it comes to how to plan for retirement, unless that basket is an already diversified investment such as a balanced mutual fund. If you put your money into only one investment and the value of that investment goes down, you could lose everything. That’s not how to retire wisely. If the value of the investment goes up you will probably make a lot of money, but no one is worried about that. We all need to protect our money against losses.
Talk to a professional and find an investment mix with a level of risk that you’re comfortable with. When starting to plan for retirement talking to a professional is the best way to go, you don’t want to make a rookie investment mistake and try to go about it on your own.
Take advantage of your employer
If your employer offers a retirement savings plan such as a 401(k) you should take advantage of it. Very often employers match your contributions or at least make some contributions on your behalf. Any contribution from your employer is like free money so why not do it.
According to Forbes there are several ways you can take advantage of your employer retirement savings plans, one of which is to play catch up if you haven’t yet started saving. “The annual contribution limit for employees who participate in a 401(k) is $18,000 for 2016, the same as in 2015.
The catch-up contribution limit for employees age 50 or older in these plans also stays the same at $6,000 for 2016. Even if you don’t turn 50 until Dec. 31, 2016, you can make the additional $6,000 catch-up contribution for the year.”
Don’t stop saving when times get tough
If your budget gets tight it’s very easy to justify stopping your retirement savings because you probably don’t have plans to retire in the near future. However that’s not how to plan for retirement wisely. Instead of stopping your contributions all together, just lower them until you get back on your feet financially.
It’s much easier to increase your contributions than it will be to completely start over again. Watching your savings grow is also good motivation to keep going. Every single time you contribute $1 into your retirement savings just think of it as another step to the freedom of retiring someday.