Tips From Accounting on How to Save for Retirement
Retirement is a often thought of as a treasured destination – a place where you have the freedom, time, money and inclination to do all the things you didn’t get to do in your working years. But getting to that point of retirement security takes deliberate planning and effort.
Let’s start with budget and realistic goals. Forecasting realistic spending needs versus projected retirement income can be difficult. By making a retirement plan early, retirees can better estimate their limited income versus how lavish or flexible their retired lifestyles will be.
Once you have goals in mind, it is never too early to start saving and investing those funds. Younger individuals should think about paying down student loans and saving as soon as possible. There will always be more money to spend than you have and if you just try to save what is leftover, it’s very difficult. For this reason, solid advice for many years has been to pay yourself first. Don’t wait to save with what’s leftover; as soon as you get paid, save a percentage of your money and then live off what’s left. The younger you start saving for retirement, the less you’ll have to put away each month. Compounding will create exponential growth over a longer period of time. Also, if your firm matches retirement savings plan payments, make sure to take advantage of it! This is “free” money that should not be overlooked in your saving years.
If you are savvy enough and understand the investment choices available to you, you can go ahead and select mutual funds, REITs, alternative investments, real estate, etc. If, however, you are less sure of the options, there is no shame in sitting down with a financial planner. Planners will often ask a lot of questions about your goals and help create a plan around that. Be clear with your planner regarding how he/she is compensated to avoid any decisions based on conflicts of interest.
At the beginning of your career, you may want to consider more aggressive investing as you have time to ride out market cycles. Older savers nearing retirement may want to consider an approach that is more conservative and offers lower risk.
Also, if you are a business owner or partner and have either succession planning or winding down of your firm to consider versus a long-term employee of a large firm, a financial planner can help set up structures, investments and long-term plans to accommodate.
In many cases the fear of getting to the planning stage is worse than the planning itself. Be methodical. Be honest about your own financial situation and seek out a life in retirement that is realistic and meaningful to you. With those thoughts in place, a retirement plan will come more naturally.