Retirement Planning: Are You Really All Set?

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retirement planning

Ah, the days when one can retire from work and enjoy one’s days leisurely. One can just imagine how wonderful they’d be. But how financially prepared are you for your retirement?

The answer would most likely be ‘unprepared’ if one is to believe currently available statistics. This would be a big mistake and must rectified as soon as possible. The reason is simple: the sooner you take action, the easier it’ll be when the day you retire arrives.

We know how easy it’s to postpone something like retirement planning while dealing with your daily commitments. Planning for retirement can also sound scary to some.

The good news is that retirement planning doesn’t have to be mind-numbingly complex. You just have to take some time out to ponder what you’d want during your retirement days and take the necessary steps to secure your desired comfort level financially.

Disclaimer: we are not financial advisors, so please read what follows at your own risk.

Importance of Retirement Planning

It pays to think about your retirement as early as possible.

Financial freedom is a nearly universal goal. It’s something that people from every corner of the planet strive to achieve. True financial freedom means that you no longer have financial worries even when you’re retired. Unfortunately, savings alone will not be sufficient to cover most people’s retirement needs even though it’s a good starting point.

It’s clear that retirement planning involves crafting and following a concise plan of action such as budgeting your expenses, tracking your income, and proper asset management, among others.

Bonus: being financially secure also prevents you from being a burden to your family and friends.

When Should You Start Planning Your Retirement? 

It’s a good idea to have your retirement planning done as soon as possible.

The common wisdom is to plan for retirement as early as possible, preferably in your early 20s when you start earning some income. The rationale here is the sooner you start to save, the more time your money has time to grow. That being said, it’s still possible to start saving right now depending on your situation. 

Retirement planning often requires some short-term lifestyle sacrifices to achieve your long-term goals. For example, you may have to cut down the number of times you eat out so that the money saved can be directed to your retirement fund.

Planning for Your Retirement

A dollar saved is a dollar earned…but only if you invest it wisely.

1. Work With a Financial Planner

Unless you’re one yourself, it can be a good idea to hire a financial advisor to assist you in planning your retirement fund. A financial planner can assist you in creating a plan on how to save, investment management, estate planning, and such.

It pays to seek out a few different advisors and ask them to provide a ‘free’ consultation before settling on one that best fits your needs. The rationale behind this is that each advisor will likely have their own approach in helping you to meet your needs. That said, it’s ultimately up to you to decide which one will likely suit you best among the available options.

Lastly, it’s also prudent to review your progress every 12 months or on some scheduled interval to see how you’re doing and if anything needs adjusting.

2. Learn to Invest

There are many assets available for investment, including but not limited to stocks, bonds, and treasuries. Nowadays, there are even things like cryptocurrencies that have gained mainstream attention. Whichever investment vehicle(s) you choose, it’s a good idea to structure your portfolio in a way that limits the possible downside while leaving it open to the upside.

The advice for the majority from the great investor Warren Buffett is to invest in a low-cost index fund. This requires setting aside a monthly contribution to the fund and letting it work its compounding magic for the years and decades to come. Do note that most wealthy people invest do not invest in index funds themselves because they have other options that are unavailable to the majority. Nevertheless, this doesn’t invalidate the above advice for the majority.

Keep in mind that any investment comes with risks, and your wealth will also take time to grow. You will also need to have the appropriate mindset and patience necessary to weather the ups and downs.

3. Utilize Automation Tools

Be open about utilizing the various tools that your financial institution offers. Things like automatically allocating a portion of your monthly income to your retirement fund or paying down your debt should be utilized to their fullest. This set it and forget it approach is one of the best tools that you can use to help build your retirement nest.

Other Issues to Consider

retirement planning
Don’t neglect the things that can affect your retirement strategy.

1. Have An Emergency Fund

It’s prudent to set aside an emergency fund that can cover three to six months of your personal expenses. What many people forget is that you need to occasionally add to the fund to compensate for inflation unless this is already built-in. It’s also a good idea to have your emergency money in the form of something liquid i.e. easily convertible into cash.

The emergency fund will hopefully buy you time to stabilize your income should anything unexpected happen.

2. Settle Your Debts

Many people use debts to fund their lifestyle, and many more become trapped by debts of various forms. Credit card, student, car, and house loans are some examples of how pervasive debt have become.

Debt itself isn’t necessarily bad but taking on more debt that you can afford is rarely a good idea. It is thus worthwhile to take a long, hard look at your current debt level and devising a strategy to reduce or eliminate the debt completely while formulating your retirement plans.

This is because servicing debt requires you to allocate money that could have otherwise formed part of your retirement fund. Being over-indebted could also negatively affect your credit score, not to mention the psychological stress that it can bring.

3. Review Your Insurance Policies

You’re hopefully one of the many who have bought insurance policies as a form of protective investment. The reason we say it’s an investment is simple: insurance acts as a buffer against unexpected events.

Many people, however, tend to see these as unnecessary expenses, which is why this mindset needs to change. This is because insurance is there to protect against the unknown. It’s you paying a ‘subscription’ that you’ll hopefully never have a need to use but can become invaluable when you do.

Insurance policies also tend to change over time along with your circumstances so remember to review them when they’re due for renewal.

In a Nutshell

plan your retirement now
The sooner you set up your retirement strategy, the better.

It is never too early to start considering your retirement needs if you are still on the fence about it. The sooner you act, the more time your money will have to compound and the more money you’ll have when you retire. You may also become more financially savvy in the process of planning for your retirement.