Five Steps To A Top-Notch Retirement
Retirement planning is one of those tasks that always seems like it can wait. Let’s face it, day-to-day living often takes all we’ve got. Thoughts about the future might include where Junior goes to college or that next career move, but rarely extend more than a few years from today. We come by this naturally of course; for most of our history, humans have had to focus on where the next meal would come from just to stay alive. Fortunately for all of us, we now have the luxury of making today as great as it can be, while also planning for a secure and rewarding future. If you’re inclined to do both, here are five easy steps to get you the retirement you deserve.
Set Specific, Measurable Goals
Without question, the single most important thing you can do to secure your financial future is to set goals for yourself. But in order for these goals to matter, they need to be specific and measurable. For example, saying “I want to have financial security in retirement” is not a specific or measurable goal. Instead, it should be something like: “I want to retire at age 65 and be able to replace 80% of my pre-retirement income for a period of at least 30 years.” See the difference?
There are two reasons why real, thoughtful goal setting is so important. First, concrete goals are great motivators. Think about the example above: by getting specific, you have something more tangible to pursue. Second, and perhaps more importantly, the more specific you are, the easier it will be to measure your progress.
Do the Math
It can be tedious, but there’s no substitute for seeing the numbers. As with any projection, calculating retirement funding needs requires that you make some assumptions – about inflation, investment returns, taxes. And because of the time periods involved, even modest changes in assumptions can have a huge impact on the outcome. There are lots of retirement calculators out there to help with this exercise but, if you feel overwhelmed, a good financial advisor can help.
Develop a Plan
You’ve got your objectives; you know the numbers; now it’s time to formulate a plan. This is the phase where details really matter. If funding a child’s education is one of your financial goals, for example, financial aid, scholarships, student loans and grants are all funding sources to consider. Do you expect your child to hold a job while in college or do you want them to focus exclusively on their studies? Is it better to save in their name or your own? A detailed plan will ensure that you cover all the bases.
Monitor, Review and Update
At least once a year, it’s important to review the results of your efforts and see how they compare to the goals you have set. Unforeseen events, in the financial markets or in your own life, can have a significant impact on your progress. Estate plans and investment strategies are always vulnerable to changes in regulation or tax law. Without a routine checkup, even the best of plans will quickly become obsolete.
Find a Trusted Advisor
Planning your financial future takes time and effort. A good professional advisor can evaluate your entire financial picture, and help you focus your energy on the issues that really matter. Find an advisor you can trust, and make sure you understand how they are compensated. In today’s environment, an investment in sound financial advice can pay dividends for many years to come.
It’s human nature to believe that if we do our best in the here-and-now, the future will somehow take care of itself. It might be true in many cases, but why take any chances? A few simple, proactive steps today can help make that period of your life truly special.