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There are two things you need to think about when considering your retirement from work. The first is your financial well being. You want to be in a position to at least live your current lifestyle. Second, work on eliminating potential problems for yourself now while you are in a better position to do so. Potential problems are larger house maintenance and repair issues, any health issues you have, and taking care of legal arrangements. You don't want to have to deal with problems in your retirement that could have been prevented during your working years. Ideally, retirement is the time to relax and enjoy life and the fruits of your years of work and preparation. It is not the time to worry about the leaking roof, your will, or your sleep apnea. These stresses only take away from your quality of retirement life. So here is your goal. The day your retire you are in great health, your home is in good shape, your legal and financial affairs are in order and addressed, and your retirement account is in very safe investments and providing you with a steady income. You can learn more about retirement planning ideas at Bowman’s Money College Retirement Plan. There is plenty of time but get started
Remember something - it is YOUR future. This is a little easier to prepare for than dealing with the present because you probably have some time to work with. Preparing for the future is going to be different that dealing with now. Let's just say that retirement is 10 years away. Ten years is a lot of time to get ready for something. Let's also not define retirement planning as simply putting money away. It is eliminating problems for yourself that you know will be that much harder to deal with when you are elderly. The key to saving for retirement is consistency. I don't get caught up in investing strategies or hot tips. There are people that do that for a living and can do much better than I can. Those people are the ones I go to with my retirement money and let them manage its growth. Honestly, I believe my best retirement money plan is the 401k plan many employers offer their employees. Real Life Story: Here is a story about preparing financially for retirement. I remember a time when the company I was working for fell on hard times. The economy was bad and people just were not spending their money on the products we sold. To deal with the smaller sales the company reevaluated its expenditures and starting making some cuts in order remain in a position to pay its bill during this hard time. One of the things they trimmed was the 401k matching they provided to employees who contributed to their retirement accounts. When the company made this announced what happened next surprised me. About 15% of the workforce stopped contributing to their 401k accounts all together! It shocked me how many people decided to stop contributing toward their future because there was no employer match! Mind you, you could still contribute up to 15% of your income and it was still pretax dollars that went into your account - as always, a very big reason to use the 401k option for retirement planning. This was during 2008 and you may remember that during this time prices of stock were dramatically falling because of the sub prime home loans that were made during 2005-2008. I believed this was the most ideal time for me, in my mid 30s, to buy, buy, buy! Rather than decreasing or eliminating my contribution I adjusted my spending and my budget to all me to raise my contribution to the maximum allowed. Once the market corrected itself and prices began to rise again I would adjust my contribution again and go back to my regular budget plan. Take advantage of opportunities when they come up
I worked with a guy who I will call "Jim". We made about the same amount of money. Jim did the opposite of what I did. He decided he would stop investing in his 401k altogether. He said he was going to use that money to pay toward his home loan which carried a 6% interest rate. I am not the strongest player when it comes to math but here is what that sounded like to me. He was going to first forego saving for his retirement and pass on the compounding interest advantage you get with stock investment. He was then going to pay federal income tax on his work earnings (about 15%). Jim would then use dollars, whose purchasing power had just been diminished by 15% (tax), to save 6% on his home loan. In my eyes you automatically gain 15% "interest" on your retirement money because you didn’t pay that tax amount on that money. I could understand where Jim was coming from. He was afraid that he would put $100 into his retirement account today and next week its value would have fell to $90. However, I think Jim was missing the bigger picture. First, none of use were going to get any younger. We were getting older every day and the work finish line got closer each of those days! We would retire someday, and we would need money to live on. Second, we were not investing for next week! We were investing for years and years from now. We were buying an ownership stake, managed by professionals, at a now discounted price, that had an excellent chance of growing into much more than its original value. That is the value we were banking on to live on in our old age! So Jim decided to save 6% on the money he had borrowed for his house. I decided to use the 15% "free money" (tax savings) to buy even more stock that would eventually grow into my retirement money. Use a budget to prepare for future opportunities Following a realistic, written budget puts you on the track to not only manage your money as it comes in and dictate where it will go but allows you to do even more with your income. It identifies both opportunities and waste. Your money will become more efficient in the fact that you will get more for less. That leads to savings you can apply to paying off debt. Paying off the debts builds your credit score. You gain twice at this point. You free up more money because the debts are gone. Your higher credit score puts you in a position to take advantage of cheaper rates and better deals on many things besides even credit cards. This strong position now allows you to aggressively save for retirement and other important things in your life. Here is your game plan; lets get to work!
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