Keeping your retirement goals top of mind is key to keeping your strategy on track, regardless of your age.
Count Down to Retirement With These Steps
When should I retire? Now that’s a loaded question, obscured by enough what-ifs, maybes, possibilities and unknowables that it can be difficult to answer with pinpoint precision.
You wouldn’t start a road trip by just getting in the car and driving. Some preparation is required for the sake of efficiency, and these steps can also apply to your retirement journey:
- Figure out where you want to go and when you want to arrive (your savings goal and expected retirement age).
- Decide which car – or retirement vehicle – best fits the needs for your trip. You might consider things like the car’s capacity, gas mileage and features (expected contribution amounts, tax savings, and expenses).
- Use a map or GPS to pick a timely route for your destination (set up recurring contributions for your end savings goal).
- Along the way, consult your itinerary to make sure you’re still on track to reach your destination on time. If not, consider adjusting your route (recurring contribution amounts) or choose a different destination (change your target savings amount, expected retirement age or work plans in retirement).
Quite simply, your path to retirement should start by asking big questions and end with resolving small details. When you picture your life after retirement, what gives you the most joy? Where are you? How will you pursue your dreams?
As you work toward these life goals and progress along your retirement journey, you will likely have to make adjustments. Goals can expand or you may have to preserve wealth through more conservative investing tactics.
“We think of retirement in our later years, but it’s really a life-long commitment to your financial stability,” said Joe Correnti, senior vice president of brokerage product.
Develop the Big Picture
Everyone has a unique concept of retirement, but the same two questions form the cornerstone of any sound financial plan:
- When do you want to retire?
- How much of your income do you need to replace for your ideal retirement?
The two are dependent on each other. Your ideal retirement scenario rests somewhere between your personal dreams and financial capabilities.
Traveling the globe, for example, carries a higher price tag than relaxing as a homebody. Retiring early also could be more costly, depending on your specific plans.
After you answer those first two questions, you should take inventory of your present financial circumstances.
Start with your current savings and determine how much more you can contribute during the course of your career. Keep your projections realistic, as younger workers have a tendency to overestimate both the length of their career and peak earning years. An upward career trajectory may generate additional income over the long run and offer new possibilities, but career stability lends further clarity to your financial future. Consider increasing your contribution amounts each year, especially as you receive salary increases throughout your career.
Remember the Details
If your income is unlikely to change and you find yourself behind on your retirement goals, then it’s time to audit your expenses. This could mean adjusting your goals to fit your current lifestyle, or sacrificing some comforts in the present to benefit your future self.
Downsizing a home, for example, could deliver huge savings, but so could small adjustments to your personal budget. Consider reducing the frequency of routine purchases like buying coffee on your way to work or going out to eat. You can then apply the money saved to increase your recurring contributions.
Of course, the key to saving is to make sure you stay focused on retirement and investing goals, and avoid shuffling your spending patterns. If you find yourself constantly changing your lifestyle, you might want to reconsider your retirement plans.
Expenses don’t end after retirement; many plans, for example, fail to account for the true cost of healthcare in your later years. Social Security, Medicare and maybe even working part-time could help offset your future expenses, but with greater savings comes less dependence on income sources that are subject to political and institutional change.
“The key is to remain focused on how you’ll pay for things during your working years and beyond,” said Correnti. “Once you can determine a level of financial comfort, it becomes easier to look for personal satisfaction in retirement.”
Next Step: Review these 6 considerations before drawing from your retirement funds.
The content provided is for informational and/or educational purposes only. The information presented or discussed is not, and should not be considered, a recommendation or an offer of, or solicitation of an offer by, Scottrade or its affiliates to buy, sell or hold any security or other financial product, or an endorsement or affirmation of any specific investment strategy. You are fully responsible for your investment decisions. Your choice to engage in a particular investment or investment strategy should be based solely on your own research and evaluation of the risks involved, your financial circumstances, and your investment objectives. Scottrade, Inc. and its affiliates are not offering or providing, and will not offer or provide, any advice, opinion or recommendation of the suitability, value or profitability of any particular investment or investment strategy.
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