Retirement Planning Basics: Things Ain’t What They Used To Be

December 4, 2007 By Debbie Dragon

In the “old days”, people would set aside some money each week and it would be enough to retire on.  The chances of that being enough these days are slim to none!

1.  It’s never to late too start, but start as early as possible!
If you start early in your life, your money will have more time to grow.  Each year your interest gains will be based on the previous year- which is what we call “compounding”.

2.  Use your company 401K plan if you have one.
Contributing money to 401K plans gives you a tax deduction, not to mention tax-deferred growth on the money you put there.  Many employers offer some kind of matching- whether they match 100% of your contributions or a smaller percentage- that’s free money.

3.  Be realistic with goals.
How do you want to live when you are retired?  How much will that lifestyle cost you?  With that in mind, determine how much money you’ll need to supplement your social security, 401k and other sources of retirement income and then put that amount into your budget for saving.

4.  Consider IRA’s
An IRA offers tax advantages.  Traditional IRA’s give contributors tax deferred growth (you only pay tax on the money when you actually withdraw it) while a Roth IRA offers tax free growth but doesn’t allow for any deductible contributions.

5.  Invest in Stocks over the long term.
Over a long period of time, stocks are among your best opportunities for achieving high returns.

6.  Have a diversified portfolio
The best investors are those who “diversify”.  Have a good mix of stocks, bonds, savings accounts, cd’s and other investment vehicles to ensure you are getting the best gains possible while minimizing your risk.
7.  make smaller withdrawals upon retirement to stretch out your money.
When you retire, don’t pull out all of your saved money all at once.  Instead, take out money from your taxable accounts first and allow the tax-advantage accounts that you have to continue to compound and grow for as long as possible. 
8. Consider a part time job.
You’ve probably seen many retired aged individuals working part time in places like Walmart as greeters. Not only does working help you reduce the amount of money you need in your savings for retirement, but it gives you socializing opportunities you may not otherwise have.
9.  Stretch it out!
When you retire, you can stretch out your assets by moving to an area with a lower cost of living, or making modifications to your lifestyle.

Posted in financial plans, retirement planning

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