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Three Steps to Retirement Readiness- How to Face Your Future with Confidence
Last Updated: August 19, 2013
According to a recent survey, less than half (46%) of people age 50-70 feel “very confident” they’ll be able to afford even the essentials of living in retirement1. Due to this increase in financial stress, people experience more health issues, are less productive at work, and face greater challenges in their personal relationships2.
Imagine how it would feel to look forward to retirement with no stress about how you’ll pay for it. What would it be like to know you’re doing exactly what you need to do to prepare for true financial independence? Would you be able to breathe a little easier, fear less, and focus a little more on enjoying life today if you knew you were prepared for tomorrow?
Here are three essential steps you can take to prepare for the retirement you want:
1) Decide to Dream
The first step is simply choosing to act. Focus on what you want your retirement to look like and decide to do whatever is necessary to make it happen.
Take time to imagine a typical day in retirement. When will you get up? What will you spend your day doing? Where will you go? Who will you surround yourself with? Give as much thought to how you want to spend your time in retirement as you do to how you’re going to pay for it.
Once you have a clear vision for your retirement, you’ll have a better idea of how much income you’ll need, which will allow you to focus on doing what’s necessary to get there.
2) Direct with Discipline
Once you have clarified your non-financial goals for retirement, meet with a Certified Financial Planner TM professional like those at Pension Consultants. With that person’s help, calculate how much you need to save to reach your retirement goals, how much you should try to save each month, and then do it!
Save early. Over half (57%) of respondents to a recent survey said they wished they would have started saving earlier for retirement3. Starting early is by far the most powerful tool at your disposal to help you reach your retirement saving goals.
Save consistently. Contribute regularly to your retirement savings account, not just when you have money to spare. Use payroll deductions so your contributions are automatic; this will help eliminate the danger of forgetting to save toward your goals.
Save aggressively. Save as much as possible. If you can’t save a lot right away, start with a little, and then next year set aside a little more. By slowly increasing the amount you save, you’ll hardly notice the difference – but your retirement account sure will!
Save wisely. Some experts believe the correct allocation of investments is the single most important factor in investment success4. Determine the right mix of investments with the help of a good adviser, and stick to your plan. Don’t allow your fears to take control when times get tough, but continue a disciplined approach to investing for the best results.
3) Dismiss Distractions
As you move through life, you’ll find lots of reasons to stop saving for retirement. Resist them! Stay focused on your vision for the future and learn to say “no” to those things that will distract you from your goal. Here are three areas that can be the most difficult to resist:
Debt: Avoid debt at all costs. If you’re already in debt, attack it with a vengeance and pay it off as quickly as possible so that you can then save for retirement. Contribute enough into your retirement plan at work to get the full company match, but use everything else toward eliminating your debt.
The exception to the no-debt rule is debt incurred to harvest a greater financial gain. The mortgage on your primary residence and your student loan are examples of what some advisers call “good debt”. These loans also charge lower interest rates and can be paid off over a longer period of time than “bad debt” like credit cards.
College: We all want the best for our children and would like to help them get a quality education. But if it keeps you from saving toward your retirement, it’s time to get creative and look at other options. Otherwise you may have to move in with your well-educated children when you retire because you don’t have enough saved to pay your own way.
Extras: There’s nothing wrong with treating yourself and your family to the pleasures of life – vacations, nice cars, eating out, birthday celebrations, and the like. But be careful those extras don’t keep you from saving for retirement. Live within your means and stay committed to the savings goals you set for yourself, or when retirement comes, you may not have enough for the necessities.
1Retirement Check-In® survey released by Ameriprise Financial in February 2013
2http://stress.about.com/od/financialstress/a/financialstress.htm
3Retirement DerailersSM survey released by Ameriprise Financial in May 2013
4http://www.sec.gov/investor/pubs/assetallocation.htm
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