While retirement planning can be stressful and overwhelming, there are some ways to make it a little easier. Making smart money decisions today can mean a big payoff during your golden years, so you need a plan to keep things on track with your retirement financial planning goals.
Click through to see how you can get on track to a worry-free retirement.
1. Know Exactly How Much Money You’ll Need
Not knowing how much to save for retirement can cause anxiety and it will be more difficult to make informed financial decisions. You can set clearer goals when you calculate how much money you’ll need based on your expected living expenses, family situation and future obligations. Use an online retirement planning calculator to visualize your retirement goals.
2. Set Up an Automatic Savings Plan
If saving money isn’t your forte, set up contributions to your retirement fund as an automatic deposit. This can reduce the pressure of having to think about how much to set aside for retirement every month and make it easier to adjust your spending habits. Talk to your employer or your bank about enrolling in an automated plan so you can just set it and forget it.
3. Turn Retirement Contributions Into an ‘Expense’
Modifying your personal budget to accommodate for retirement contributions is one of the best ways to make saving for retirement a priority. You can research all the retirement advice in the world, but if you’re not contributing to your fund consistently, you’ll never reach your goals. Adding retirement contributions as an expense in your budget can help you prioritize this goal. There are dozens more easy ways to save for retirement.
4. Monitor Progress Regularly
Even when you have your retirement contributions automated and know your fund is growing every month, you must check on your investment performance regularly. Whether you’re managing your portfolio yourself or having a financial advisor handle it for you, take a close look at your performance every few months to ensure your accounts continue to grow. That’s why “set it and forget it” retirement plans can be risky.
5. Generate an Extra Income
In addition to growing your retirement fund via compound interest, you can generate a side income through a second job or by setting up a source of passive income, such as a business or property investment. Making financial decisions early for a return later can set you on the path of financial freedom before and during retirement.
6. Determine All Sources of Support
If you have a pension package through work, plan on selling a business or property or have other sources of income and resources to cash in on during retirement, be sure to make a list of all potential sources so you know how big your nest egg might actually be. Identifying these sources can help you stress less about generating more income during your working years, or give you an incentive to set up passive income sources now that will provide steady income throughout retirement.
7. Maximize Your 401k Employer Contributions
According to Bloomberg, two-thirds of Americans don’t contribute anything to a 401k or other retirement accounts offered as an employee benefit. Neglecting to take those contributions year after year means Americans need to work that much harder just to meet their retirement goals. Contribute the maximum amount your company will match every year to make retirement planning that much more effective.
Plan Ahead: 15 Big 401k Questions to Ask Your Employer
8. Eliminate Debt Sooner Than Later
Carrying a debt load into retirement can eat up your savings and make your retirement years that much more stressful. There are some types of debt you must tackle before you retire. Take steps to eliminate high-interest debt as soon as possible so you’re not left making payments on interest you’ve accumulated on loans and credit cards over the years after you retire. Use the debt snowball method or adjust your monthly payments to reduce the time it takes to pay off your credit cards and other high interest debts.
9. Make Relocation Plans
If you don’t currently live in a retiree-friendly community, or the cost of living in your area is extremely high, consider moving to a state where your retirement savings will last. Moving can be expensive and stressful in and of itself, so you’ll need to plan to avoid extra costs and headaches. Doing some research on retirement-friendly communities and activities in new areas early on can help you make an informed decision as you approach retirement.
10. Make a Smart Investment Withdrawal Plan
If you’ve been working diligently to contribute to your IRA, 401k or other retirement accounts over the years, make sure you’re aware of all withdrawal penalties and fees before you make withdrawals to fund your retirement lifestyle. Different accounts have different tax benefits, and by the time you retire, you should have reduced the tax burden from income earned during your working years so you can cash in on your wealth-building years. Estimate your taxes accurately using the new tax brackets, so you have a fair idea of how much of your savings and earnings you can count on.
About the Author
Sabah Karimi is an award-winning writer with more than 10 years of experience writing about personal finance, lifestyle topics, and consumer trends. Her work has appeared on U.S. News & World Report, Business Insider, Yahoo!, AOL Daily Finance, MSN, and other mainstream publications. She was interviewed by The Wall Street Journal and CBS News about her work as a freelance writer early in her career and now works with a variety of clients.