Planning For Tomorrow

Even if your retirement is 10, 20, or 30 years away, now is the time to take steps to ensure you are financially prepared. Otherwise, you run the risk of outliving your savings or having to maintain a different lifestyle than the one you had envisioned. Here are a few things you can do to increase your chances of having ample funds for retirement:

1. Run the Numbers

You can run the numbers using an online retirement calculator, or you can sit down with a qualified financial planner. The objective is to determine what your retirement savings goal should be. Savings goals vary dramatically depending on a number of factors, including:

• What age you want to retire
• How long your retirement lasts
• Your potential medical costs in retirement
• Your daily retirement expenses
• Whether or not you plan to work part-time in retirement

After you know your savings goal, it is important to see if you are on track to hit that goal. If your savings come up short, you have options, such as increasing your retirement savings, opting for different investments, or reducing some of your planned retirement expenses.

2. Make Sure Your Retirement Savings are Appropriately Diversified 

It is essential to see if your retirement savings and future retirement contributions are in the right types of investments. Ideally, you will rebalance your portfolio every year. Many financial planners recommend holding a blend of stocks, such as large cap, small cap, foreign, and domestic options, to hedge against dips and fluctuations in the stock market.

As you age, you will gradually move some of your money to less risky investments. A financial planner who specializes in retirement planning can help you decide what level of risk you need to take to help your account grow to its fullest potential.

Tax diversification is another component to consider. You may be unsure as to whether your retirement tax bracket will be lower or higher than your present tax bracket. Prepare for both scenarios by utilizing pre-tax and post-tax accounts. A 401(k) is a common example of a pre-tax account, while a Roth IRA is a popular type of post-tax savings account.

3. Create and Stick to a Budget

One mistake that many savers make is raiding their retirement accounts for unplanned expenses, such as home repairs or tuition costs. Not only does this rob you of future growth, but you also lose a portion of the money to income taxes and early withdrawal fees.

Prevent this from happening by living below your means and saving for large expenditures. Some prefer to have an account for each type of expenses, such as a college fund or home repair fund, while others like to keep everything together in one account. Figure out which option you prefer and see that your budget incorporates these items. 

Contact your local financial planning service for more information and assistance.