"Retirement" often conjures images of individuals concluding their professional journeys, transitioning into what many term as the "golden years", typically around their early 60s following a lengthy career. However, the concept of "retirement" encompasses far more profound implications.
"Retirement" means your time is now yours. This is huge. We only have so much time in our lives and to be able to retire means you've bought the freedom to spend your time how you want. This is an incredible goal and worth pursuing.
Retirement means you've bought the freedom to spend your time how you want.
Retirement planning can seem overwhelming, especially when the internet is overflowing with advice and strategies. However, the reality is that successful retirement planning boils down to things:
Knowing what to do
Actually doing it
In this insight, we aim to give you a clear roadmap on getting started with retirement planning. While gaining knowledge is essential, remember that real success lies in putting that knowledge into action.
Retirement Planning 101: The Foundation
There is a lot to learn when it comes to retirement planning, but the foundation is extremely simple. Spend less than you make and invest the savings. While this might sound obvious, 56% of American's are not on track to comfortably retire.
Spend less than you make. Invest the savings.
This mandate is simple to understand, but difficult to accomplish. Here are some steps to take to get on track:
Set Up a Budget
Before anything else, know where your money goes. Make a list of your monthly expenses, and figure out how much you can set aside for retirement. Don’t forget about those little expenses; they add up!
Start to Save
Once you have a budget, determine a set amount to save each month. Think of this as paying your future self. Make sure to put this money aside immediately when you receive a paycheck, similar to paying rent. Treat this like any other bill in your life. The more you can set aside, the faster you'll be able to retire.
Get Invested
Now, it's not enough to just save; you need to get invested. Head over to www.fidelity.com or www.schwab.com and open and investment account. You can setup recurring contributions that are automatically paid the same day each month. Once you fund your account, purchase a low cost S&P 500 ETF:
Vanguard S&P 500 Index Fund: Ticker - VOO
SPDR Portfolio S&P 500 ETF: Ticker - SPLG
These both are extremely low cost ETF funds that will move similarly to the S&P 500 Index. These funds out perform the majority of professional investors every year and at much lower cost.
Staying on Track
As time passes you need to stay on track. Keep the monthly contributions going. As you get pay raises, increase the amount your saving. Continue to learn more about different types of retirement vehicles, employer sponsored plans, company matches, Roth IRAs, and more. The more you learn, the sooner you'll be able to retire.
What Really Matters: Action
I have a friend with an 8 year old daughter and when she receives her allowance the first thing she does is place it in her investment account. Yes, she wants to buy Legos and the Harry Potter books, but she's really excited about saving. With an attitude like this, there is no doubt she'll has the temperament and personality to retire early.
Retirement planning is not as challenging as it first seems. The key is consistently executing your plan. Every. Single. Day.
Sticking to your budget might mean resisting that impulse buy or choosing to cook at home rather than dining out. When it's time to save, prioritize it. Regularly check your investments and make sure you aren't paying high fees. And don’t leave free money on the table – if your company offers a retirement match, call your HR department to ensure you’re taking full advantage.
The real secret to retirement planning isn't just about gaining knowledge, but about putting that knowledge into persistent action. Remember, it's the day-to-day doing that truly shapes your financial future. Take the reins, stay disciplined, and your future self will thank you.
Retirement Planning: Learning More
Action is far more important than knowledge when it comes to retirement planning, however, once you've taken action, knowledge is power. Here are some key concepts and articles we'd recommend to get the most out of your retirement savings:
What is a Traditional IRA?
What is a Roth IRA?
What is a 401(k)?
What is an employer sponsored plan?
How to maximize your employer match?
Retirement vehicles for the self-employed
Retirement vehicles for business owners
How much do I need to save to retire?