Retirement shouldn’t be an un-reachable dream for Americans. But it’s true that the sooner you start, the better. By the time you’re in your 40s, there are some steps you should make toward your retirement. But don’t fret – you can begin your retirement planning today, and you do not have to start earning a six-figure income to accomplish it. With focus, discipline, and structure – your dreams of traveling the world, or just living comfortably at home, aren’t as far away as you think.
The Planning Process
- First, figure out where you stand. It’s recommended that by the time you’re 40 years old, you have accumulated twice your annual salary. Check your savings accounts and investments. Write these numbers down and move onto the next step.
- The next step is to start planning how you’re going to pay off your debt. This task always seems daunting depending how much you have left to reduce, but it is absolutely an investment with returns. Doing this allows you to get the most out of your retirement savings. If you have any balances on a credit card with a high interest rate, your best move is going to transfer the balance to another credit card with a 0% introductory APR. The intro offer lasts a few months most of the time, so determine how much you need to pay off every month until the offer runs out.
There isn’t a magic potion to paying off debt and it works the same for everyone, despite their financial status: Budget a plan with your current finances that allows you to pay your current necessities/investments, debt, and savings.
You’ve reduced your debt, you know where you stand – what’s next?
- This is a perfect time to start increasing your contributions to your retirement plan. This is your true retirement savings…the 401(k), 403(b), and 457s. By increasing your contributions, you don’t need to go crazy right before retirement trying to save every penny. Really push the limits on how much you can “pay yourself” to get your contributions matched by your employer.
- Making sure you’re insured is another very simple way to ensure there’s a much less dent in the future when “emergencies” arrive. Health, car, and house emergencies are always the biggest reasons people have for not moving forward in their retirement planning.
- Investing in real estate (or even just investing in your own home) is an opportunity that comes, especially in recessions. You want to be an “opportunist buyer” and take advantage of these economic times. If you don’t think the opportunity is there, look at what has been happening in Detroit.
- Earning extra money at this point is an obvious, but wise move as well. We aren’t talking about getting a part-time job somewhere – we’re saying if you’re not looking at your investment options now, you are really pushing it. Meet with a financial planner to discuss new investments. Whether it’s real estate or stock, you’re at a prime age to begin investing and allowing those investments to grow. Putting it off reduces the time for growth and increases your risk.
While getting covered and investing into retirement planning doesn’t provide instant, tangible profits – it’s a message you’ll one day pass onto your children.
If you’re in your 20s and 30s, now is the absolute perfect time to launch your retirement plans. If you’re in your 40s, go full force with these simple steps. If you want a comfortable retirement (meaning – you’re not wondering what your life will look like in 10 years when you’re 60), then now is the time.