My number one tip in planning for retirement is to not procrastinate. “I’ll do it later, there is plenty of time,” is an often heard out loud thought that many people possess. It’s never too soon to start saving for your eventual retirement and if you find yourself between the ages of 55 and 65, you know how important saving is because it’s right around the corner for you. It’s time to dial in the saving, and be at peace with how prepared you are about your next phase of life.
If you find yourself rounding third base and headed for home, asking yourself these three questions can help you become a more astute saver.
Are You Ready to Retire?
#1: Assess if You are Ready
In order to know if you are ready to retire, you need to have a grasp on a few things and have them ready for a financial advisor.
- Checking account balance
- Savings account balance
- Tax Rate
- Rate of return
Also, your current income must be something you have a solid grip on, as well as what you project that you will be spending when you eventually retire. There are many items in your life that may need to be assesses, including the size of your home, ability to take vacations, and what kinds of cars you can afford.
Also ask yourself this question – do you have any debt?
If you find yourself answering “Yes” to that question, the best thing you can do is start paying down debts immediately. This may be something you do in the form of cutting out expensive dinners or other luxuries and start allocating money towards the debt.
Other things to look at that can help reduce costs and therefore allow you to pay off debts:
- Cable TV options
- Expensive gym memberships
- Clubs, magazine subscriptions, & auto-bill programs that aren’t necessary
If you add just $10,000 to your retirement account every year you can generate approximately $495,000 over a 20 year time frame.
#2: Take a Gander at Your Portfolio
If you are planning on retiring, you need to have a balanced portfolio. The large returns that can be achieved on the stock market are always something people like to have some skin in, however, it does come with risk. If you are nearing the age of retirement, you can’t afford to suffer a large financial loss. Most of your money should be conservatively invested later in life because you aren’t able to recover from substantial losses. Your level of risk can be high when you are younger, but in the latter years of life, you need to be very selective on your investments.
Always re-balance your portfolio.
#3: High Interest Debts Must be Paid Off
As I mentioned earlier, you can’t ignore paying down your debt and you need to adjust your lifestyle to become properly set up to pay them off. As a first objective, you should pay off any debts that have a high interest rate. Credit cards are the obvious first choice for most people. They can be an enabling financial instrument to help afford luxuries and vacations, but if not paid off, the high interest rates can drastically increase your debt if you aren’t careful.
If you have any specific questions, please ask them by commenting below.