Retirement planning can sound so ominous, sort of like preparing for death. However, it’s something we all need to look at regardless of the type of retirement we want – whether that be early retirement or a more traditional retirement scenario.
The last time I checked, working until you drop as a Wal-Mart greeter is not a good retirement plan. With that being the case, saving for retirement is something that needs to be looked seriously in order to stay on a path that leads to happiness. The problem is many don’t even know what that path is. The great thing about planning for retirement the right way is that most, if not all of it, are basic tenets that are easy to follow. It is my belief that even those who know little about investing in the stock market can follow these simple steps to get started on the right foot.
Kill Your Investing Fees
One of the things that always drove me nuts when I spoke with investors was when I saw them allow fees to bite a massive chunk out of their retirement portfolios. This came in two main forms. The first was through investing in mutual funds. Mutual funds aren’t bad, per se, but many of them can be rife with fees. When you invest in a mutual fund and let it ride, without paying any attention to them, those fees can add up to tens of thousands of dollars. If this is you, consider looking at comparable low cost index funds to save yourself money.
The second was through over active trading. If you want to actively trade, that’s fine, but make sure you’re keeping watch over those fees. Maybe it means you cut down on your trading, or negotiate a lower commission. If you’re a good enough client many brokers will lower your commission fairly quickly. The point is that fees can be a significant drag on your retirement portfolio. Find ways to cut them down and you’ll be much better prepared in the long run.
Start as Soon As You Can
I know this sounds like a no brainer, but start your retirement planning as soon as you can in your career. Far too many individuals, myself included once, allow excuses to hold them back. Whether it be fear, lack of funds, etc. none of these are reasons to hold you back.
What is often overlooked is that time is a huge component to retirement planning. Time is what helps your money grow, plain and simple. More often than not, your company sponsored 401(k) is the best place to get started – especially if they offer a match.
Like the time issue above, putting aside more for retirement is another no brainer. Unfortunately, very few do it. There are many ways to invest more; you just have to know where to look. One option could be to cut back spending in one area of your life and defer that savings to your retirement planning. You can also do something like start a weekly or monthly saving goal that is funneled directly to your IRA.
One of my favorite ways to save more for retirement is through your 401(k). Many 401(k) providers allow you to set annual increases to your contributions. You select a given date each year and they increase your contribution by a given percentage that you determine. A very similar thing can be done when you get a raise, by increasing the amount you’re putting away so you don’t spend it all.
What are some other ways to do retirement planning the right way? What excuses have you seen or heard to delay saving for retirement?
Photo courtesy of: 401kcalculator.org
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