Senior couple staying home and staying fit during COVID-19 lockdown. How to have a better retirement … [+] plan now.
Are you dreaming of the day that work becomes an option, and you reach financial freedom? Those who avoided the negative effects of the Coronavirus recession have seen their salaries rise. While stuck at home, many people have seen their savings accounts swell. Combined with the stock markets reaching record highs, many are reaching net worth milestones faster than expected.
Here are seven steps to take now to have a better retirement plan. Hopefully, they will translate into a larger retirement income or, perhaps, allow you to retire a few years earlier than expected.
The earlier you start investing for retirement, the sooner you will be able to achieve financial freedom. This is the day when working becomes an option, and you could survive indefinitely if your paycheck (or income) went away. Sadly, many Americans are on the never-ending treadmill, living paycheck to paycheck. A trusted financial planner can help you get your financial house in order so you can sit back, relax, and eventually enjoy your dream retirement.
Planning for retirement doesn’t have to be stressful. If you prefer to pull out your few remaining hairs when thinking about your finances, you can STOP READING NOW. However, if you are looking to improve your life, and make the journey through your working years more financially fabulous, follow these seven tips for a better retirement plan.
Automate Finances as Much as Possible
Look for ways to make as much of your financial life automatic. Set up a payroll deduction to your 401(k) or another retirement account at work.
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Make things easy on yourself. Set up all of your bills to be automatically paid with your credit card (but make sure to pay it off every month) versus manually paying every bill. While that may only save you a few minutes per bill, it can add up to hours and hours over a year. It will also help you avoid getting hit with bank overdraft fees.
Make Sure to Get Your Full Employer Match
For the average worker, skipping the employer match could easily be a million-dollar mistake over your working life. For others with higher incomes, ignoring the employer match could be a multi-million-dollar mistake. You must, I repeat, you must get all of your employer’s 401(k) match and contributions. Your 401(k)-employer match is like free money. Would you turn down a raise? I didn’t think so.
To get the full employer match, figure out how much you have to contribute to the retirement plan and make sure to contribute at least that much money per year. Skipping this one simple step could be a multi-million-dollar 401(k) mistake.
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Don’t Try and Time the Stock Market
Since the beginning of investing, there have been people trying to time the stock market. Most people don’t have the time or the desire to watch the market on an hourly or daily basis. Set up a diversified portfolio and dollar-cost average into it over time, ideally, out of every paycheck or at least monthly for those saving into an account like a SEP IRA, traditional IRA, or Roth IRA.
For some, it might be scary to make more investments when the market is doing well. For others, it could be a difficult decision on whether or not to buy when the market seems to be in free fall. Personally, I don’t think either of these things will be as hard as the retirement for someone trying to live off Social Security (SS) alone. The average SS check wouldn’t cover the cost of an average one-bedroom apartment here in Los Angeles.
Dollar-cost average into a diversified investment portfolio and go back to enjoying your life. This will nearly eliminate the need to worry about short-term market volatility. You buy more shares when prices are low and fewer shares when prices are high. That won’t eliminate risk, but it should greatly reduce your stress.
The 24 hour news cycle can be bad for your wallet. Rudolph Giuliani, sweating. (Photo By Tom … [+] Williams/CQ-Roll Call, Inc via Getty Images)
CQ-Roll Call, Inc via Getty Images
Turn off the 24-Hour Stock Market News Cycle
The stock market goes up, and it goes down. Over the long term, the trend has been steeply rising. In plain English, on the whole, the stock market goes up more than it goes down. Paying little to no attention to stock market news will help you have a better retirement. However, if I happen to be appearing on one of those cable news programs offering tips on how to have a better retirement, then you should definitely watch. Stock market forecasts, the winner of a sporting event like the Superbowl, GDP, the list goes on, really have little to do with you and your journey to a better retirement plan.
Only Work With A Fiduciary Financial Planner
If you thought you might have cancer, would you want to go to a doctor who only got paid for giving you more chemotherapy? Many so-called financial advisers are actually stockbrokers with a more marketable name. They are not supposed to dispense financial advice and may only be thinking about making their commission by selling you a product you may or may not need or want. Instead, only work with a Fiduciary Fee-Only Certified Financial Planner™ who has a legal duty to put your interests first.
A fabulous financial planner can help you set up a comprehensive retirement planning strategy to reach your specific goals and help you stay on track to reach those goals in your time frame. Additionally, a financial planner can carry all the stress of the day-to-day movements of the stock market while you relax and enjoy your drink of choice on the beach.
Being proactive with you help can improve your retirement.
Take A Proactive Approach To Your Retirement Plan
I hate to admit it, but every day we are just a little bit older and a little closer to our full retirement age. While thinking of getting older is about as enjoyable as wearing two masks to avoid getting the Coronavirus, being proactive with your retirement plan can make aging a bit less taxing. The younger you are, the easier it will be to save enough for a secure and relaxing retirement. Starting late may require you to work longer or make more drastic cuts to your lifestyle in order to afford even the basic necessities of life once you enter retirement. Be proactive and start investing now for the retirement you desire. Let compounding interest work its magic. You will be amazed at how even a small amount of money per month can add up over time.