Retirement is one of the biggest transitional experiences you’ll ever have – so it’s important to be prepared. Unfortunately, many people feel less than secure about the idea of having a financially safe retirement experience. Even after decades of careful planning, you might not feel that you’re fully prepared to live the life you want without the support and security of a consistent income.
The best way to make sure that you’re ready for retirement is to start planning early. The quicker you begin to prepare your nest egg and consider how you’re going to use your income towards your savings, the more you’ll have when retirement age rolls around. Here, we’ll take a look at just seven steps that you can take to improve your chances of a positive retirement experience.
Step 1: Make Sure You Diversify Your Investments
While it’s tempting to shy away from any risk when you’re trying to prepare for a secure retirement, diversifying your investments is a good way to make sure that you’re not storing all of your eggs in a single basket. Consider looking into stocks to help you improve your growth during this important stage of your life, and mix them with other elements like bonds, mutual funds, and different assets that fit with your risk tolerance and liquidity needs.
A well-balanced portfolio should help you to weather some of the changes in the marketplace and generate the kind of income you need to cover the common expenses most people address during retirement. If you’re not sure about where to invest, you could always consider speaking to a financial advisor.
Step 2: Start Saving Straight Away
The minute you take on a new job, you should be starting to save towards your retirement. Even if you’re young, and decades away from retirement yourself, you should be using the time you have to your advantage so you can build a portfolio with plenty of compound interest. Even a very small amount in your retirement account can eventually lead to a large sum of money over time. If you’re in your early twenties, try contributing about 10% of your income into your IRA.
Once you get into your thirties, put about 15% of your income into your retirement account, and when you hit the age of over 40, your contribution should be about 20%.
3. Minimize Your Debt
If you’ve got a lot of debt to worry about when you’re heading towards retirement age, now might be the time to start dealing with it – long before you retire. To get rid of any new credit card debt, try paying out cash for major purchases. Limit your new debt and reduce exciting debt to ensure that you’re not paying all of your retirement income on your interest expenses.
You could also think about upgrading the amount you spend on your mortgage so you pay your house off faster if you have a little extra income to play with.
4. Automate your Saving Efforts
If you struggle to remember where you should be depositing your funds each month, automating the contributions you make from your paycheck to your IRA could help you to make your retirement experience a little simpler. Put your deposits on autopilot for a while, but remember to actively manage your retirement plans by raising the bar as regularly as you can.
Consistently increasing the amount you contribute towards your retirement can be a great way to improve your nest egg. However, remember that you should still have a separate emergency fund available that you can use in case of unexpected expenses. You’ll need about six months’ worth of living expenses in your “rainy day” fund, just to make sure that a last-minute disaster doesn’t decimate your life savings.
5. Make the Right Decision About When to Retire
Finally, when it comes to making sure that you’re prepared for retirement, it’s important to ensure that you’ve taken steps to decide exactly when you should be leaving the world of work. A lot of people wait until a certain age before they go into retirement – but this isn’t always the best option available. You should be thinking about creating a retirement plan advance and looking for ways to maintain plenty of cash in your IRA throughout the years.
Think about making the choice to retire when you feel like you’ve got enough money in your nest egg. However, remember that this won’t be possible for some people – so you will have to be realistic about how much you can actually save.