It’s a common refrain heard around the world. Regardless of class, gender, ethnicity, culture, location or profession, we all want to be able to retire and live comfortably in our golden years, without worrying where our next paycheck will come from or how we’ll be able to maintain the lives we’ve created for ourselves and our family. If you’re currently on the path to retirement and wondering how to make the most of this journey, read on. Today, we’re discussing five things you can do now to make sure your retirement is spent relaxing with your loved ones, not worrying over numbers.
1. Assess your retirement goals.
To make sure you meet them, it’s important to set your retirement goals now. This applies whether you’re 20 and just opening up your 401(k) with an employer or 55 and looking forward to only a few more years at the office. Ask yourself what you want to do with your retirement phase of life. Do you want to keep working a side or part-time job to bring in extra income and cultivate your interests? Do you want to take up a hobby and learn an entirely new skill, such as salsa dancing, without any real interest in earning an income from that pursuit? Or, do you simply want to spend as much time as possible with your family, and leave work and everything else behind?
Understanding your goals now can help you determine how much you’ll need to save to make those dreams come true. If you want to travel the world, for instance, you’ll need more money than someone content with just staying at home and watching the sunset every evening. This brings us to Step 2.
2. Determine how much you’ll need.
Most people significantly underestimate how much money they’ll need to ensure a comfortable, wealthy retirement. You might think that with an employer matching program, you’ll be set. While this might be the case for some people, others might find that they require a supplemental Individual Retirement Account (IRA) or similar setup to amplify their investment.
To truly figure out how much you’ll need based on what you plan to do with your retirement savings, it’s helpful to sit down with your financial planner. He or she can walk you through your expectations and compare those to your current earnings and the interest you stand to accrue. Then, you can determine precisely how much you need to be aside now to make sure that when the time comes, you’re set.
3. Diversify your income streams.
In prior years, a person could work a 9-5 job for 30 years, then retire and have all the money he needs to live comfortably. Now? It’s wise to diversify your income stream so you’re not totally dependent on one source. As technology continues to proliferate, some traditional jobs, such as those in manufacturing, are being replaced or supplemented by smart machines that can do the work in half the time. This is only one example of an industry that might not be as secure now as it was when your parents or grandparents first entered into it. As such, if you can bring in money from another avenue, you can help safeguard your finances in the event that your full-time job changes.
One place to look is real estate investment. You can also work with your financial advisor to get started in stock market investing, or perhaps you’re ready to turn your hidden talent into a paying side gig. Regardless, aim for pursuits that can keep generating income even after you’ve retired from your full-time position. In this sense, real estate and the stock market are solid bets.
4. Invest your income.
Sure, you could squirrel your paychecks away in a savings account that generates a modest amount of interest. Yet, that money could actually be working for you, and growing exponentially in the process, if you invest it. While it can be challenging and sometimes confusing to build an investment portfolio, that’s where your financial planner comes in.
He or she can work with you to determine how to allocate your investment among stocks, bonds and other funds in a portfolio that makes sense for your short and long-term vision. Don’t be afraid to ask questions during this process to make sure you understand it all correctly. Your planner will also ask you questions to determine the level of financial risk you’re willing to undertake. As a general rule, the younger the investor, the higher level of risk incurred, and vice versa. This is because if you have plenty of years before retirement, you’re in a better position to ride the ebbs and flows that the unpredictable (yet highly profitable) stock market can yield.
5. Pay off those major debts.
No one wants to retire with a hefty mortgage still sitting in front of him. To this end, make a goal to pay off your mortgage as quickly as possible. While some financial experts say that paying your mortgage off within five years of your retirement is an ideal goal, that might not be feasible for your family and that’s OK. Still, don’t stick with the 30-year terms set out by your bank. Rather, add to your minimum monthly payment whenever possible to pay it off quicker than that, if possible. It might be a stretch initially, but the financial freedom you feel will be more than worth it.
The Key to Retiring with Confidence
Whether you’re 30 years away from retirement or it’s next week, the same mantra applies: Take action today to make sure you’re satisfied tomorrow. Don’t wait until you’re making plans for your big 65th birthday celebration to Hawaii to realize that saving up is important. Take small but meaningful steps today to save you can, as smartly as you can, to make sure you enjoy those special years as fully as you can.