Savings Challenge: 7 Ways to Prepare for Retirement Early


Nearly 75% of Americans feel they are not ready for retirement, partly because many fall behind on early planning for retirement. No matter how much you make, early preparation for retirement is crucial unless you want to work for the rest of your life.

 

Unfortunately, building up the savings for a comfortable retirement can be a great financial challenge, but with the right plan and hard work, you can overcome the challenge and get on the road to securing your retirement.

 

It starts with taking small steps that can make a big difference on your road to retirement. Highlighted below are seven strategies to keep in mind to help put you on the right path to retirement.

 

1. Assess Your Current Situation

Although no one likes to admit they may be ill-prepared to retire, taking an honest assessment of where you are now financially is essential. It can help you set your retirement goals.

 

You can start by totaling all the money you have saved in your accounts. Be sure to include taxable accounts, workplace retirement plans, 401(k) or 403(b), or individual retirement accounts (IRAs). When accounting for money in your taxable accounts, don’t count the money saved up for emergencies or large purchases, such as a new car.

 

Once you know what you have, you can create a plan that can help you boost your retirement benefits. With the plan, you can also correctly address where you fall short.

 

2. Take Full Advantage of Retirement Accounts

Once you’ve assessed your situation, start identifying additional savings opportunities to take advantage of for retirement. While you can put your money in a regular savings account, it may not be ideal for retirement savings.

 

One opportunity that may be available to you is through an IRA. You can open an IRA through a bank, online brokerage, personal broker, bank, or investment company. An IRA allows you to invest in various financial products, including mutual funds, exchange-traded funds (ETFs), and more. It also offers tax-free growth on earnings, tax deductions, and even tax credits if you’re eligible.

 

Aside from an IRA, you can invest in a 401(k) through your employer if made available by your employer. It is a tax-advantaged investment account that allows you to contribute a percentage of your paycheck to it each year, lowering your taxable income.

 

3. Choose Your Investments Wisely

As you prepare for retirement, be careful when making investments.  You don’t want to put your money into items that will likely lose value.

 

Research before investing in things like real estate, stocks, and bonds. It will help you make more informed decisions.

 

In addition, assess your risk tolerance before choosing an investment. While risk tolerance may vary depending on your age and preferences, taking too much risk can be dangerous.

 

While greater risk tolerance might be a little more acceptable early on in one’s journey to retirement savings, the majority of people tend to shift to a more conservative investment approach as they approach retirement.

 

4. Buy Adequate Insurance

Saving money, budgeting, and investing is good. But it isn’t enough. You should also have an adequate insurance plan.

 

Insurance plans can help protect you from unexpected calamities, helping to ensure that you live your retirement as worry-free as possible. Here are some insurance plans you should consider buying before your golden years:

  • Life Insurance:

It can help your loved ones if you pass away before retirement.

  • Health Insurance:

If you are on a tight budget, having medical insurance allows you to still get proper health care in case of an accident or an ailment.

  • Long-Term Disability Coverage:

This insurance can protect you and your family if you become disabled.

  • Auto Insurance:

It will cover the expenses that may result from a car accident.

 

5. Confront Any Retirement Investment Shortfalls

Do your accumulated retirement assets exceed the amount required to fund your retirement fully?

 

If the answer is no, you may have things holding you back. During your retirement planning, you need to identify these constraints and determine how you can solve them.

 

One of the shortfalls you should confront is debt. Try to pay off any debt, including car loans, credit card debt, payday loans, and mortgages, because it can weigh you down financially. However, this doesn’t mean you should sacrifice your savings goals.

 

Create a plan that allows you to pay down your debt and save for retirement. Consider reining in your unnecessary expenses and finding resources to help you make lifestyle adjustments, if possible.

 

6. Stay on Top of Estate Planning

Estate planning is another key step when organizing for your retirement. It involves creating a plan for the transfer of your estate to your beneficiaries after your passing. Not only does it help you set up care for your dependents, but it also ensures that you get a say in how your assets are distributed.

 

It’s important to consider estate planning when preparing for retirement since doing it later can be emotionally draining, for both you and your loved ones. Moreover, you may be reluctant to start as you get older.

 

When you plan your estate early, you can also find ways to minimize federal estate taxes and control your wealth. Nonetheless, many sources suggest periodically reviewing your estate plan to ensure that it keeps up with changes throughout your life.

 

7. Consult a Financial Advisor

Even if you have expertise in money management, you should consider consulting a financial planner. They’re more informed about financial management for retirement and can help you plan for it. A qualified advisor will ask you many questions to get the complete picture of what type of retirement you want to live.

 

With the information, they can create a customized plan that helps fulfill your goals. They will also ensure your retirement portfolio maintains a risk-appropriate asset allocation. Working with them will make a lot of your difficult decisions easier.

 

Bottom Line

 

Taking the time to plan for retirement is essential, and with some effort, you can ensure a comfortable future for yourself. Consider implementing the tips mentioned above to help you create a plan for your retirement. If you’re just starting your retirement planning journey, check out our beginner’s guide to retirement.

 

This blog is not intended to provide any tax, legal, financial planning, insurance, accounting, investment, or any other kind of professional advice or services. To make sure that any information or suggestions in this blog fit your particular circumstances, you should consult with an appropriate tax or legal professional before taking action based on any suggestions or information that we provide.