Planning for retirement is something that should begin before one is even out of college, but that isn’t what usually happens. Don’t worry, no matter where you are in your career it is never too late to plan a successful retirement or even learn how to retire early.
The first step in planning for a successful retirement is assessing where you are financially. Take stock of your existing income, debt, savings, investments, and assets.
Include all debt, even if you think some of it won’t be relevant during your retirement. If you have student loans, credit card debt, or a mortgage, these need to be factored in. Not just because they could eventually take part of your budget when you retire but also because they limit the amount of money you have available to invest in your retirement.
Savings, investments, and assets are pretty straightforward for most people but also include things like life insurance policies in this category. Depending on the type of policy you have, it may be accruing cash value that could be more wisely invested in a different financial product.
One of the most important things you can do before you reach retirement is become debt free. This will allow you to retire on less without negatively impacting your quality of life. Don’t worry, you don’t have to pay off all of your debt before you start saving for your retirement. You can achieve both goals simultaneously.
The first step in paying off your existing debt is to create a solid budget targeting that goal. This will mean becoming very clear on what current expenditures are needs rather than luxuries and pairing down those in the luxury category to funnel money into paying off debt and investing.
This is one of the more difficult objectives for those who have been living without a budget previously. It can feel like deprivation to not put dinner out with friends or a new pair of shoes on a credit card. However, if you work an entertainment budget and other fun things into your regular budget you will still be able to put money aside for these little luxuries. Also, once you have paid off existing debt these categories can receive a larger allotment of the budget so the perceived deprivation won’t last forever.
Finally, when you have unexpected money appear, be ready to put it into your retirement account, savings account, towards existing debt, or into investments. This includes work bonuses, tax returns, lottery winnings, inheritances, and any other financial windfalls that may come your way. People often decide to treat themselves with this type of money but it can make a huge difference in your life if it is utilized with more thoughtful consideration.
There are several ways you can invest your money for retirement. The most common methods are in an official retirement account that is offered through your employer or a private agency. This is a great place to start but there are other options that can help prepare you for a more affluent retirement.
If you are just getting started in the world of financial investment, you will need a guide or a lot of time to study. Typically, it is better to find someone to help you navigate the stock market. When looking for a financial advisor, look for one that is a fee-only financial planner. This is an important distinction because these types of advisors are usually fiduciaries, which means they must always put the best interest of their client first when offering recommendations.
To make absolutely sure you are working with someone who puts your interests first, ask if they have a suitability standard or fiduciary responsibility to you as your advisor. Working with someone who has a fiduciary responsibility to you ensures they are putting your financial future first.
No matter what stage of life you are in, there are always steps you can take in the present moment to ensure greater financial abundance and freedom for your future. While planning for a successful retirement is important, planning for financial stability and success before your retirement is what will get you to that retirement goal.