Recent research estimates that 74 percent of Americans aren’t prepared for retirement. Even worse, an estimated 42 percent of Americans are likely to retire broke. But there is no reason these dire predictions should come to fruition.
Think of your retirement as a long road trip that you plan to embark on with your family. There’s a lot that goes into the logistics of an extended trip: You must decide what destinations you plan to visit, plot out what routes you’ll take, and figure out where you’ll stay, explore, and eat. The same type of planning must go toward retirement. There are a lot of factors to consider, and you’ll be set up for a great trip if you plan accordingly.
6 Things to Do in 2019 to Prepare for Your Golden Years
Many Americans don’t realize the benefits of having a financial advisor. They think that kind of help is only for the rich, which is not true at all. A financial expert can help create a holistic plan for your financial future, but for those who are not ready to dive in with an advisor, there are some things you could and should be doing right now to set yourself up to be able to afford and enjoy your retirement.
1. Understand (and Get Rid of) Your Debt.
What kind of debt do you have? Look at any bill that you pay interest on—mortgages, credit cards, cars, student loans, and so on—and find out how much you’re paying in interest every year. Research how you could pay these bills off at a faster rate. For instance, if you’re a homeowner, you can shave years off of your mortgage and save thousands of dollars in interest by making just one extra payment annually.
2. Ask Yourself, “How Do I Envision My Life in Retirement?”
To take the first steps toward determining how much money you’ll need to retire, you have to ask yourself what retirement looks like to you: What type of lifestyle do you imagine? Will you want to spend time traveling? Are you planning on staying in your home, or do you plan to relocate? Will you want to stay in the same area but downsize to a smaller home? Are you hoping to quasi-retire early and work part-time after leaving your full-time career? To paint the picture of your life in retirement, these are some of the big questions to consider.
3. Estimate How Much You’ll Need to Retire.
To figure out how much you’ll need to save to live the retirement lifestyle you’re imagining, use a retirement calculator to crunch some numbers. This will give you a realistic picture of your retirement goals. It’s also important to consider inflations rates will change over time and how this should factor into your retirement. Free inflation calculator tools will start to give you an idea of this.
4. Take a Closer Look at What You’re Making and Spending.
Time is the biggest free resource that we have for retirement planning, and the earlier you start saving, the better. A recent survey found that 72 percent of millennials have saved less than $10,000 or nothing at all. To get serious about saving for retirement, you’ll have to take an honest look at your monthly expenses and savings.
Is there a lot of extra spending that you could reduce somewhat painlessly? The little things add up over the years. Maybe those extravagant weekly dinner dates could be reduced to every other week. Or perhaps you can downgrade your cable plan if you don’t watch the channels that are costing you an extra few bucks a month. Scaling down your lifestyle may be necessary if you want to start ramping up your savings.
5. Understand the Investment Options Available to You.
The vast majority of people will only be able to retire with a big enough nest egg if they’ve been investing in places where they’re getting returns. However, research shows that two-thirds of all Americans don’t contribute anything to a 401K or other retirement account available through their employer.
To put it simply, you need to invest your money. And if you think that you don’t make enough to save anything worthwhile, know that compounding interest can turn a small contribution into serious savings over the years. Try using a compound interest calculator to realize the benefits of saving even small amounts at a time.
Find out if your employer offers 401K matching, and get started with your contributions as soon as possible. Even if you can only swing a small amount, it’s a step forward in your retirement savings. If a 401K isn’t an option for you or if you’d like to invest in addition to your 401K contributions, look into starting an IRA that allows you to take advantage of potential tax-deferred or tax-free growth. Remember that 401K and IRA contributions are flexible so you can change how much you’re contributing depending on your life circumstances.
6. Learn How Your Retirement Plan Will Work.
It’s important to know what the pension plan(s) in your household will look like. If you’re relying on a spouse’s pension, it’s vital that you understand what happens in the event that your spouse passes away before you. It’s also key to determine what you qualify for with social security. The government’s benefits calculator tool can help you configure those estimates.
When it comes down to it, there are only a few core options that will help you reconfigure your retirement savings: make more, save more, reduce expenses, or postpone retirement. But don’t get discouraged! Simple changes that lead to better planning can make a big impact on your retirement savings. By gaining a better understanding of your current financial situation and implementing some of the best practices outlined above, you will set yourself on a path to securing your future today.
Are you ready for retirement? Share with us in the comments below!
- Average Retirement Savings Are Not Enough but There’s Hope
- Do You Need $5 Million to Retire?
- Are Seniors Saving Enough to Retire?
By Wes Garner, President of TDECU Wealth Advisors
At Texas Dow Employees Credit Union (TDECU), Wes Garner uses his 17 years of experience in wealth management to help people work through the complex issues of financial planning and investment management. He is dedicated to empowering clients to gain control of their financial livelihood and enabling them to take the necessary steps to manage their goals.