Planning for Retirement

Save aggressively and invest wisely so you can live comfortably.

Seems like yesterday you waltzed out of college and into your first job. Retirement will be here before you know it.

It can be emotionally tough to leave the workforce. The transition is even harder if you’re financially unprepared for retirement. It’s never too early to lay the groundwork for your golden years. The first step: Give yourself an immediate financial checkup. Where is your money invested? What sort of returns are you getting? How much is left on your mortgage? Where do your credit card balances stand? Without seeing where you are, it’s hard to map out the route to where you want to go.

Next, imagine your desired retirement lifestyle. Does it include living in the same house, or moving someplace nicer, or closer to family? Will it involve a lot of travel? Do you plan to work part time or kick back full time? Once you have some answers, go find an online retirement planning calculator and see if you’re on pace financially to live the way you want. Experts say you need about 70 percent of your pre-retirement income to maintain a similar lifestyle.

In your remaining years on the job, you’ll want to save aggressively. After age 50, you’re allowed to play “catch-up” with your 401(k), as annual maximum contributions increase. If you don’t have a separate individual retirement account, consider opening one. A financial counselor can explain regular IRAs and Roth IRAs and help choose which is best for you. The advisor can also help you diversify all your investments. For years, the rule of thumb was to create conservative portfolios as retirement neared. While it’s still wise to stash emergency funds in no-risk savings accounts, times have changed. For one thing, people are living longer. Some of your money should stay in long-term investments that have a chance to yield significant returns.

It’s never good to have sizable debt. In your case, it’s wise to pay it down while you’re still working. You don’t want to use your precious retirement resources to pay off big loans. A final thought: One way to have more money for retirement is to spend less now. Some big-ticket ideas include moving to a smaller home or ditching one of your cars. Smaller savings can come from many sources, ranging from scrutinizing investment fees to opting for cheaper cable TV service.

Sure, it takes a lot of work to prepare for retirement. The good news is that you will hopefully spend a lot of years sitting back and enjoying the fruits of your labor.

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