All Posts

The biggest challenge for retirement planning is the mindset that we don’t have enough “extra” to invest. The answer to that part is simple: think of investing in your retirement as a monthly bill you must pay. You commit to an initial amount, and it can change as income increases or decreases. The next biggest challenge is deciding what types of investments to make. Usually, the best and first place people start to invest is a tax advantaged plan like your employer’s 401(k) or 403(b). The reason for that is because those contributions save you taxes right now which make less of an impact on your overall cash flow. If you don’t have access to those, the next most common place is a Traditional or ROTH IRA.  The five strategies below are the very basics, forget the fancy, high-risk  “get rich quick” investments. If you get these down, you’re on track for a financially prosperous and comfortable life in your golden years! But if you do want to “play with your money”, it’s probably best to do it using discretionary money you have leftover after maximizing these basics.  Start Early & Pay Yourself First I know, I know…everyone says this. There’s a reason for that - it’s the absolute BEST strategy to accumulate the funds you need to retire early and in the style you want to live your life. Even if you just set aside a small amount each week or month, it will give you a significant jumpstart compared to contributing lump sums in your later years (trying to catch up). If you haven’t started yet, don’t despair, just start now! It’s never too late to begin or to increase your contributions. We hear rumblings about not being able to count on Social Security and, truthfully, nobody knows what will be available to you at retirement. It’s best to plan for your own financial future and that starts by taking action on it now. For most of us, we tend to somehow find the money for the things that we really want or are the most important “in the moment”. Retirement seems like a far off goal so we tell ourselves “there’s still time”. Then, before we know it, we’re scrambling and worrying that we won’t have enough to ever retire. Ohh…you don’t want to be in that situation! Make retirement savings a high priority in your monthly budget. You’ll truly thank yourself later! Contribute as Much as Possible Any amount is better than nothing, but when it comes to retirement savings/investing, more is usually better. Start by taking a close look at what you currently spend your money on. For example, how often will you wear those new shoes? Was the last expensive meal you ate at your favorite restaurant for a lasting memory - or just because it was easier that day? And do you really need two of those lattes every single day? Before you spend, remember the best parental advice we’ve all heard and “make good choices”. Don’t get me wrong, it’s not about sacrificing, it’s about budgeting and balancing. You can do both - set some money aside for retirement and some for those extra little luxuries. And if you make those extra luxuries “special” you appreciate them all that much more IF they’re truly special treats. Mix It Up Diversify! You’ve heard that before, right? Diversification is more than just asset allocation (mixing up stocks, bonds, mutual funds, crypto), you also want to diversify in the types of accounts you have and even the investment firms. If your employer has a company match for contributions to your 401(k) or 403(b), you’re leaving money on the table if you don’t at least contribute up to the matching amount. Always remember that you’re in this for the long run. Don’t get scared into selling from normal market fluctuations (value of your investments). Sudden dips and increases happen for many reasons. It could be a fund manager is reallocating or it’s just normal reactions to the current economic environment. History tells us the value comes back. And it’s the reason for the diversification - if one investment is having a rough week/month/year, another may be having the best increases ever. Speak to a qualified and licensed financial advisor. Choose one who has exactly the experience and knowledge needed to reassure you that you’re on the right track, or steer you in a better direction. Buy Real Estate Investing in your own home might be the best and easiest way to start in the world of real estate. And if you’re more conservative in your investments, it might be the only real estate you ever own. While it may take 30 years to pay off that mortgage, you’re simultaneously building equity. And, it always increases in value in the end, except in rare locations. If the typical down payment is a concern, work with your mortgage broker as there are numerous down payment assistance programs and most are geared toward first-time homeowners. Owning a home means access to an abundance of options for obtaining needed cash flow pre- or post-retirement. If more monthly income is a goal, you might have space over the garage or other areas for tenants. And if your future health situation needs it, it might be the space for live-in assistance so you can stay in your home longer. Another option, if you’re in a cash flow pinch, is to take out a HELOC - Home Equity Loan/Line of Credit. If that’s not for you because you don’t want to pay back a loan during your latter years, there are options such as Reverse Mortgages or a Home Equity Investment - HEI (aka Home Equity Agreement - HEA). With those options, you get the money you need and still live in your home for as long as you like. While your heirs won’t get the full value of your home after you pass, they’ll still get a good portion of it. Having options is a good thing, especially for that peace of mind we all want during retirement! If you’re more entrepreneurial, maybe investing in rental real estate or even land is an option for you. And real estate isn’t the only appreciable physical asset you can own. There are other possibilities such as certain collectibles or rare metals like gold and silver. Just remember that very important investment rule about diversification. Have a Goal You don’t need a goal to get started - instead start with the “start early” part - just do something. When considering the ultimate financial retirement need, life expectancy and lifestyle are critical to determining the goal amount. Do you want to travel? Do you want to indulge more in life’s luxuries? Estimate your expenses such as monthly bills, vehicle/rideshare costs, help around the house, and those extra “just because” treats for yourself. Add a little more because you likely forgot something (10% is common). Then adjust that total for inflation. Once you see progress, the ultimate goal will seem a lot closer and easier to confirm. You might see the numbers hit sooner than you expect! But you must start first! Pro Tips for Even Better Retirement Planning: Try to complete anticipated major expenses while income is flowing, or budget for them when planning your financial needs at retirement. Do your best to anticipate as much as you can so it's less of a surprise when it happens. Consider whether you’ll need a new car during retirement years, or are there home repairs such as a roof that’s seen better days? What about your plumbing and electrical - will it last during retirement? There will absolutely be unexpected expenses after you retire so go into it in the best possible way. Protect yourself - now and in the future. This means in addition to having that extra slush fund for the unexpected, make sure your insurances are adequate. Life happens and it’s better to be proactive and ready than having to deal with a potentially devastating hit on your lifetime retirement funds. Unless you’re wealthy enough to self-insure (have enough extra funds to cover nearly any financial emergency), insurance is the tool to mitigate potential large cash outlays. In addition to your auto, home, health, and  life, you’ll want to consider long-term care insurance so you can have options if you become ill or unable to fully care for yourself. Some expenses may be covered with Long Term Care insurance such as household chores…read up the benefits and don’t assume all plans cover all possible needs. The point is to be aware and prepared. Have a plan in place for the “what if” scenarios so you don’t have to worry about them later. You’ll be able to simply enjoy the rewards and time-freedom to do whatever you want during your retirement years! As it should be… It wouldn’t feel right to end this without throwing in a great resource chock-full of Retirement Tax Tips!