Maybe I’m strange but I get a thrill preparing myself for retirement.
It’s not that I’m looking forward to those days – I love my life and being in my 20s. However, I’m also aware that everything I do during this first decade of adulthood will have lasting effect on the rest of my life – and if I can help my future self by saving for retirement then that’s great.
Retirement is something most people look forward to.
This is often a time where you have more freedom to do what you want, when you want, assuming of course you have made good preparations for it.
In order to make that happen, a number of things need to be taken into consideration. Health and financial independence are probably the two most important. Of course, there are other things to think about, but if you take care of yourself over the years, and are healthy enough to enjoy retirement, then having the money to do what you want becomes the chief concern. In order to prepare for retirement you need to lay a foundation, a basic plan to carry you through to your golden years and help ensure you’ll be able to live like you want to. Here are 5 suggestions to help you prepare for retirement.
1. Start Saving Early
Don’t wait until you’ve been in the workforce for decades to start putting money away for retirement. The earlier you start saving, the more your money works for you. Put together a budget that will help you put a little aside for retirement as soon as you begin receiving a pay check. Consider the type of lifestyle you envision for retirement, then work to make it happen. It may seem foolish to think about how much money you’ll need to live on in 20, 30, or 40 years, but when the time comes you’ll be glad you gave it proper thought.
2. Plan Ahead
If you want to retire early, or merely want to prepare for that day when you can say goodbye to the work-a-day-world, you need a plan…a destination. Where do you want to go? After you’ve decided how you see yourself living as a retired person you can determine what it will take to get you there. When you retire your life will be different than it is now. You won’t have a job to go to and you may have less money coming in. Your investments may still be paying off, but you won’t be receiving a pay check. You’ll have to watch your expenditures; learn to live within a new budget. Your expenses will probably be much less, also, maybe noticeably so due to the fact that you won’t have to worry about going back and forth to work or feeding yourself while you’re there. Many changes will be taking place quickly and having a plan to deal with them will lessen the stress when they actually take place.
3. Invest Carefully
It will probably cost more to live in the years to come–the cost of living tends to go up, not down. With that in mind, you need to carefully consider your retirement investments.
If you are in Australia and have begun working, you should already have some retirement savings in the form of Superannuation. This is a type of compulsory retirement fund which is funded by your employer who pays pays a certain percentage of your salary into. Many organisations such as Suncorp Superannuation can help you maximise your funds in order to retire comfortably. These organisations take away all the hard work and uncertainty, and return provide solid growth and peace of mind. Although many people choose to self-manage their retirement funds, it is only recommended to those who actually know a thing or two about investing.
If you are in the UK, your National Insurance contributions that you pay each month will mean you become eligible for the state pension and, if you earn enough and are not self employed, you may be eligible for S2P, a sort of second state pension that tops up the basic one.
That said, it’s recommended that you have other pension provisions in the form of private pensions and investments because a basic state pension does not cover anything above the basics. For your own investments it may be tempting to take a chance on a long shot with the possibility of a huge payoff, but if you hope to truly enjoy your retirement years you’re undoubtedly better off taking a slow, cautious approach to investing. Seek out investments that are diversified like ‘index’ or ‘tracker’ funds. You also need to look for ways to ensure you won’t be taking any sudden, unexpected loses that will cripple your chances of retiring on time. This can be done by considering what’s called your ‘asset allocation’ (the mix of different types of investments).
4. Focus on the Long Term
Taking the slow, steady approach to investments means exercising patience. Not expecting to make a gigantic return on a small outlay of cash is simply common sense. Yes, that may happen occasionally but the smart investor takes a long term approach to putting away money for retirement. Gambling with your future is not the way to go. If the person investing your pension funds were to go to a casino and bet everything on black, you would probably not be happy with them, especially if the ball landed on red. The expectation of making quick money is thrilling but unrealistic. Instead focus on long term investments. Putting your money to work in places that ensure a slow, steady income beats finding out you lost everything by taking a chance you never should have.
5. Seek Tax Advantages
As the time approaches for retirement thought must be given as to how you’re going to access the money you will have saved. Depending on how you have saved you may face tax consequences. Consulting with a financial advisor can help you find the most equitable solution to this problem by coming up with ways to lessen the tax burden and keep more of your money available for you to do the things you want. It all comes down to planning ahead in order to enjoy your retirement.
Like this article? Keep reading to keep learning
Four Things to Consider when Buying Unit Trusts or Mutual Funds
Why a pension is like a water-proof envelope