After working at your career for 30 years or more, you might feel ready to settle back and take it easy by retiring from the workforce. Of course, to do so, it helps to be secure in your finances. When your days are no longer constrained by the boundaries of 9-to-5, wouldn't it be nice to have the freedom to do what you want, when you want? If the idea of retirement leaves you filled with stress over money, now may be the time to take charge. Every situation is different, so be sure to speak to a qualified financial advisor about your options. This way, you can look ahead and take steps to successfully prepare for living solid during your golden years.
Saving Your Pennies
You might recall with fondness the days of stashing away your pennies in a trusty piggy bank. While it would be nice if saving for retirement were that simple, don't let the more involved processes of retirement planning deter you from taking charge of your financial future. With a little bit of effort and know how, and good advice from a professional money manager, you can set the stage for a comfortable retirement.
First, consider where you are in life. Are you in your 20s and just entering the work force? If so, great; you have your entire career before you and are in a great position to sock away money. You have more time to save and ride out any fluctuations in the stock market, so you can probably take greater risks than someone closer to retirement--up to your comfort level, of course.
Are you older and further along in your career but haven't really put anything away yet for retirement? It's never too late to start investing in your future. As you mature, you might want to consider investing in more stable stocks, where your return may have a greater guarantee.
No matter what life stage you are in, you can take stock of your financial goals. You might want to think about what you want to accomplish with your money, both now and in the future. Are you looking to buy a house? Start a family? Put your children through college? Whatever your current goal, bear in mind your long-term plan for retirement as well.
If you've heard it once, you've heard it a thousand times--track your spending and know where your money goes. Even if you feel confident that you already know where your money goes, writing down a budget never hurts. You may be surprised at how the little expenditures, beyond your known expenses like the mortgage and groceries, can add up. Often, you forget the costs of lunches out, new clothes or movie rentals. These little daily outlays can quickly add up and knock you off track financially.
When it comes to planning for retirement, having a complete picture of where your money goes is important; not only can you see how you spend, but you may gain insight into areas you can work on. Do you buy things on impulse that you can't afford? Do you owe more than you can pay each month? It is good first step to try and resolve issues like these as quickly as possible. Otherwise they could follow you into retirement or even delay your ability to retire at all.
Creating a written budget and goals both for the present and the future might also be useful for you, just to see what you are working toward. That small amount you set aside today, with patience, can build into something much larger. Watching your nest egg grow can be very empowering. Not only can you take pride in knowing that you are providing for your family's current needs, but you will also know that you are protecting their future.
Invest for Success
If you are overwhelmed or unsure about investing, you are not alone. It can be a bit intimidating to tackle the world of stocks and bonds. But with a few key tips and the advice of a qualified professional, you can become confident in your investments and know that you are working toward a secure retirement.
First, many money managers advise you to diversify, so your money isn't all tied up in one area. If you have invested in a variety of stocks, you may be better able to ride out any stock market fluctuations. Basically, diversification reduces your risk of loss.
Second, the old adage is true: time really is money. Although it's never too late to start investing, the sooner you begin, the greater your pay off will probably be. As your money builds up, you will start to see greater returns. Your best bet might be to start contributing to an investment plan, such as your company's 401(k) plan or your own IRA, as soon as you start working. Many companies offer to match a certain percentage that you invest. If you can afford to put aside the match amount, you will be able to take the best advantage of this free money.
Investing, Inflation and Risk
Third, consider inflation. Generally speaking, the cost of living goes up with each passing year. Unfortunately, these increases won't stop once you retire. While you may be fine living off a certain amount in your 30s and 40s, that same amount may not suffice 30 years down the road when costs have increased. Factor in rising costs when you think about how much you need to invest to retire comfortably.
Finally, it's good to understand risk and what level is right for you. The lower risk investment you make, in bonds for example, will not give you the same level of money growth that a high-risk stock will. On the flip side, these "safe risks" can also do more to preserve your original investment. Bonds, government securities and fixed bank deposits are usually the least risky investments, whereas listed small cap shares and options may be the least secure investments. Large cap stocks, equity funds and separately managed equity portfolios fall in the moderate risk level. Only you can decide what investments are right for you. Your financial advisor may be your greatest asset.
No matter how you opt to save for life after work, be prepared. With careful planning, you can be set for a stress-free and secure retirement.