Whether you’re decades away from your golden years, or your retirement is rapidly approaching, you’ll need a financial plan in place. Creating that plan requires understanding your finances, preparing for the unexpected, and resolving to stay focused on your retirement goal.
The current economy has left many of us without the resources we expected to have. That can make it all the more difficult to think about retirement, since we must pay attention to our troubles in the here and now. But a savvy financial advisor can help you get and stay on track for years to come.
Why Plan Now?
If you’re years away from retirement, you may wonder about the benefit of putting money aside when you could use it for other pressing (and current needs). The answer is three-fold:
- We’re clearly in an uncertain time. The pensions and social security programs available to older adults today may be drastically cut or non-existent by the time you retire.
- Compound interest really adds up! If you start saving as soon as possible, your nest egg has more time to grow, and that growth compounds on itself over time.
- The cost of retirement is rising. People are living longer, so they need more resources for those extra years. While retirement may have lasted only 5 to 10 years a generation ago, now your retirement could last 20, even 30 years!
A financial planner can sit down with you and project what your financial needs will be during retirement. The actual amount you’ll need to save varies based on several factors, such as the age at which you want to retire, projected return on investment, standard of living, and even your personal health.
Saving Wisely for Retirement
Chances are, your company provides some kind of retirement plan. The most common are 401-K’s and IRA’s. These programs generally deduct some money from your paycheck automatically on a regular basis, so you can save without even thinking about it.
You may want to complement these saving methods with other investment options. The general rule is that the closer you are to retirement, the more conservative you should be with your investments; that way you’re less likely to lose the money just before you actually need it. The process of deciding where to invest your money is known as asset allocation. Over time, you’ll want to allocate your assets differently because your needs will change. You can do this yourself, or your financial planner can do it for you. The latter is generally the better option, since people tend to “set it and forget it” when it comes to retirement savings.
If you have questions about saving for retirement, talk to a financial planner you trust. This individual can offer a wealth of knowledge and explain each step in the process for you. Together, you can set the goals you need and create a road map of how to get to a happy, secure retirement.