You Can Win The Retirement Game By Taking Control of Your Finances

Retirement isn’t a game of chance. Instead, it’s all about strategy. By making smart choices, you can set yourself for retirement success, allowing you to have a comfortable life once you leave the workforce. The issue is, many people aren’t sure which rules will actually help them achieve their goals, causing them to make missteps. If you want to wind the retirement game, here is what you need to know.

Know Your Retirement Goals

First and foremost, you can’t win the retirement game if you don’t know what winning looks like in your eyes. Usually, you’ll want to determine what kind of lifestyle you’d like as a starting point. Then, you can estimate how much you’ll need each year to make it happen.

Think about where you want to live, the kind of home you’d like, and how you want to spend your time. Those all play a role in defining your target lifestyle, so reflect on each point to get a fuller picture.

Invest Early and Consistently

When it comes to building retirement savings, there are two major factors: time and consistency. By starting now, you are giving yourself the benefit of time, allowing you to reap the rewards of compound interest and other kinds of long-term gains.

By being consistent, you can offset the impact of volatility. When share prices fall, you can purchase assets for less. When they rise, the value of your portfolio increases.

Regardless of your age, make a plan to start putting money aside for retirement at a regular interval – such as every month – today if you aren’t already. That way, you can make as much headway as possible. Even if you have to start off with very modest contributions, something is better than nothing. Plus, you can always increase your contributions down the line.

If you already save for retirement, make it a goal to keep it up. Strive to maximize your contributions, such as by capturing your full employer match or reaching the IRS contribution limit each year.

If you currently max out your retirement contributions each year, then you may want to start a separate brokerage account. That way, you can put even more aside.

Keep Your Expenses in Check

Coming up with a plan for reducing expenses is a smart move. For example, carrying a high-interest debt into retirement means you have to shoulder that monthly payment, which isn’t ideal.

While you may not have everything paid off by the time you retire, if you start keeping your expenses in check now, you increase your odds of pulling that off. By adopting that mindset today, you may be able to achieve your ideal lifestyle for less when it comes time to leave the workforce.

Be Tax Wise When You Save

Depending on the retirement savings vehicles you use, you get different tax-related benefits. For example, with traditional IRAs and 401(k)s, you usually get tax savings now, reducing your burden. But when you make withdrawals later, you’ll have to pay taxes on the distributions.

However, with options like a Roth IRA, you pay taxes on the contributions. But when you withdraw money once you’re eligible to retire, that money isn’t taxed.

By understanding the tax advantages and disadvantages of each account type, you can make wiser choices. Which approach is best may depend on whether you anticipate having a higher income while you’re working or during retirement. At times, a combination approach might even be best, allowing you to experience some of the benefits of each side long-term.

You may want to consult with a financial planner to help decide which option is ideal for you. That way, they can help you explore the various approaches, allowing you to create a plan based on your unique situation.

Never Tap Your Retirement Fund

There are some situations where you can pull money out of your retirement fund either with or without a penalty. The issue is, in most cases, tapping your retirement fund means missing out on long-term gains. In some cases, the impact is dramatic enough that you’ll never recover the full potential value of the account, and that could leave you struggling when you retire.

Generally, you should view tapping your retirement fund as a genuine last resort. Many retirement accounts are protected from bankruptcy, and some are also shielded from creditors. Before you take money out of your retirement account, see if any other option is on the table. That way, you can preserve your future and ensure you win the retirement game.

Be Wary of Trying to Beat the Market on Your Own

Some people believe that they can do enough research to beat the market on their own. There are all sorts of approaches, random stock picking, trading underperforming Dow Jones Industrial Average stocks, growth stock picking, dividend stock, picking…the list is endless. And while there are certainly plenty of resources about stock picking – most of which claim that their approach will outperform everyone else’s – predicting what individual stocks will do is incredibly difficult, if not outright impossible.

In many cases, people are better off going a different route. By buying index funds and exchange-traded funds (ETFs), you get an automatic level of diversity and reduced volatility. It also generally requires less work on your part too, which is a boon.

Which index funds or ETFs are right for you may depend on your age, risk tolerance, and retirement timeline. However, by going with this approach, you dramatically simplify your investment activities, all while keeping your stress low.

Trade Individual Stocks To Win The Retirement Game

If you do try to trade individual stocks, understand that it’s a far riskier approach. While it’s true that you may end up with a winner, that is never guaranteed. Make sure to balance that off with other investment approaches, like including index funds and ETFs in the mix. Diversifying is your ally. With that, if an individual stock tumbles, your odds of experiencing a retirement destroying loss go down significantly.

Do you have any other tips that can help someone win the retirement game? Share your thoughts in the comments below.

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Tamila McDonald

Tamila McDonald is the Chief Operations Officer at District Media, Inc. A U.S. Army veteran with 20 years of distinguished service—including five years as a military financial advisor. Tamila is a former AFCPE-certified personal financial counselor who spent eight years post-retirement guiding wounded warriors and families on budgeting, VA benefits, and long-term planning, bringing more than 15 years of specialized writing and content leadership in personal finance and HR topics to ensure District Media delivers trustworthy, experience-backed guidance.