Planning for retirement may seem like a less-than-exciting way to spend your time, but you’ll be thanking yourself down the road for having done it correctly and effectively.
So how do you go about conquering such a daunting task? Preparation is the key.
According to recent studies, the most effective retirement savers have a few things in common. They give a great deal of thought to specifics such as the age they would like to retire, preferred lifestyle during their golden years, future health care costs and financial goals. But these super savers go a step further than just thinking about retirement; they put their plans into action.
Following are a few ways you can follow suit in order to shape up your retirement account:
1. Talk about your preferred retirement lifestyle with loved ones.
Being open and honest about your retirement expectations with your spouse and/or other loved ones will help them be on the same page as you, and in turn encourage you to reach your goals. That extra support can boost your chances of actually accomplishing your dreams for retirement. Talking about money can be tough, but chances are it will pay off down the road.
2. Purchase a life insurance plan.
There are two basic kinds of life insurance policies: permanent and temporary.
Whole-life policies, a type of permanent insurance, combine life coverage with an investment fund. While these policies are certainly more expensive than temporary options, they can be used to significantly grow your estate for your family’s benefit when you pass away.
Term life insurance, on the other hand, is the most common form of temporary life insurance and has no investment component. Term insurance lasts for a set period of time as long as you pay the monthly premium.
There are several other life insurance options to consider, so it’s important to form a relationship with a financial professional that can help you decide which type of coverage is right for you.
3. Figure out the income you’ll need to replace in retirement.
Calculating how your savings will translate into future monthly retirement income will help you financially visualize exactly what your golden years will look like.
A financial professional can help you accomplish this task, or there may be educational materials at work that can assist you with estimating your retirement income goals. Many employers are now offering financial wellness programs that help workers improve their budgeting and saving skills. Research shows that workers who used online financial advice tools and educational materials provided by their employers were more efficient retirement savers.
4. Take full advantage of your employer's retirement plan.
Contributing the maximum amount to your workplace retirement plan will make a huge difference in the size of your nest egg. You may think you can’t afford to contribute the full percentage, but once that amount is automatically deducted your paycheck, you probably won’t even miss it. Even if you do, it’s possible to learn to live on a little less in order to have a lot more down the road.
The best savers are statistically more likely to at least contribute enough to their retirement plans in order to receive their employer’s matching contribution. Remember, that’s free money and you really can’t afford to pass it up.
5. Create a budget.
The word “budget” isn’t always a popular subject to discuss. It usually conjures up thoughts of a stringent, no-fun lifestyle. But it doesn’t have to be that way.
By simply paying attention to what you’re spending your money on, you’ll be more conscious about your financial choices, which can lead to a healthier bankroll in retirement. Luckily, there are plenty of budgeting software tools to help you get started. Mint.com is one of my personal favorites, as it’s free and extremely user friendly.
The bottom line: If it’s a comfortable retirement you want, the above steps are likely to help you get there. Be confident, be positive, track your progress regularly, and check with a financial professional on a regular basis to make sure you’re on track.