12/19/2013 4:15 PM ET|
Timeless moves for a successful retirement
Times change, markets go up and down, and new innovations come along all the time. Still, some financial moves always make sense.
A comfortable retirement may seem harder to reach than ever before. But those with the right attitude will still make out OK. Here are a few ways to prepare for retirement that never go out of style.
Do what motivates you to save
Throughout your life you will be faced with many financial decisions: Do you pay off the mortgage early or do you invest that extra sum of money? Do you pay off high interest debt or do you pay off the smallest balance first? Many people opt to follow what the math says, but the right approach is always the one that will give you the best results.
For example, will you actually invest the extra money if you don't use it to pay off your mortgage or will you spend it? And we all know we'll pay more in interest if we don't pay off the debt with the highest interest rate first, but some people are more motivated when they pay the smallest balance off first because it gets them excited to think of new ways to save. Sometimes emotions win over math because personal finance is all about persistence and discipline. If you decide to follow the math, then make sure your behavior tightly follows the model you envisioned in your calculation.
Stop worrying about whether making or saving money is the better way to build wealth
This debate will probably rage on forever, but a dollar is a dollar whether you saved it or earned it. Rather than trying to figure this out or spending time defending your position, why not spend time maximizing whichever comes more naturally to you? Some people find it easier to find ways to make more money while others love saving money. When you are done perfecting one strategy, give the other side a try too. It's actually better to work on both than to concentrate on just one of the two ways of building wealth.
Tax deferral is a good strategy for practically everybody
If a comfortable retirement is your goal, then make tax deferral a priority. There are all kinds of reasons you haven't put the maximum amount possible into tax-advantaged accounts every year. But every one of those excuses is leaving money on the table. Tax deferral will ultimately allow you to pay a lower tax rate on all or part of your withdrawals, especially if you drop into a lower tax bracket in retirement. Plus, you won't have to pay taxes on gains, dividends and interest year in and year out. That's money you could spend on necessities, traveling, food, toys for your grandkids and whatever else you fancy in retirement.
Start as early as you can, because there are so many benefits
The compounding effect is powerful, but that's just the beginning of why starting to save early is great. It's so much easier to learn frugal habits when you aren't used to an expensive lifestyle, because you already know you can live happily on Ramen every day. When you begin to save at an early age you won’t have to play catch-up later in life. And you'll never let accidents wipe you out because you will always have a savings cushion.
Spend time on financial education
Investing can be simple and effective, but there are also many sub-optimal ways to go about it. Many people waste too much money and countless working hours making investing mistakes. Even if you have a money manager who handles your nest egg for you, it's imperative that you learn how markets and investing work so you can guide your adviser to make the most prudent decisions for you at all times.
A comfortable retirement is still possible for people who save consistently throughout their careers. Use these time-tested strategies to build wealth for the future.
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This is AWFUL advice. You have to create a structured plan for saving money no matter how much you make, then you have to learn within the means you have left after savings is done. My cousin has earned 4x me every year since we got out of college at the same time. I'm retired, she's still working, and I tease her that I've got a free room for her on the 2nd floor of my mortgage-free home after she's finished blowing all her money.
The American economy is based on people spending money which makes jobs for other people. This was a good idea when money was spread over a large number of people, now it goes to the very top few percent of people.
I know that I spent less than people who I worked with and bought smaller cars and kept them longer. But I did but money into retirement funds when I was in my early thirties, before that time it was not a popular for individuals to save. The reason that it helps to save earlier is that you do not know what will happen in life, I had to stop working five years ago at 57 due to health problems. I really needed to work for another 4-5 years to have saved enough to feel really comfortable. You have too remember that 2 out of every 5 people stop working earlier than they wanted due to one of the following reasons, ill health, looking after parents or losing their jobs. I am still okay because I started early enough, my two children started saving for retirement at 22 when they finished college.
So I think their are a lot of good ideas on saving, but the only one to remember is to spend less than you earn and save. Modern cars now last longer as do most goods that we buy.
Ill health is bad enough, but if you are struggling with money to live a normal life that makes it worse.
You do not have too spend hours per week on your retirement accounts, just use the low cost Index accounts in your companies plans. If you do not have a company retirement account go to one of the low cost companies like Vanguard, you can do most of it online and their fees on one of the lowest.
Good luck to everyone and have a happy new year.
Hard yet simple!
Remember this: "Where there is a will there is a way". and, "If it is meant to be it is up to me". Now get out there and do it.
What happens to most people is that they won't spend the time planning and working toward ways to improve, many think what takes place is just the way it is!!! Well this is not true neither is it luck (good or bad), good things happen when you plan them bad things happen when you don't plan.
Why be responsible and plan for retirement? If you prepare yourself for a good career you are punished by having to pay for those that did not, if you save you are punished by paying for those who would not, and if you believe that you should be responsible for yourself and independent from government involvement in your life you are criticized by others because you do not pay your fair share and the that the government knows what you need in your life more so than you do.
Much better to spend now and become another member of the dependency class. Welcome to the USA under the Obama administration.
Best Case for everyone is that you avoid many of Life's curve balls and survived to retirement mostly untouched by too much misfortune. Far too many folks who make it that far Assume that should be the case for everyone else. Life is literally full of Twists and Turns that could have easily sent a person on a totally different life trajectory. Far better or Far worse.
A ton of folks live within their means and something happens crushing all their retirement plans. So what we can all do is plan for the future as best we can. Diversify our skill sets to maximize our Income Levels. Slow and steady wins the Race in investments, don't be in a competition as compared to others, they aren't you.
The People that don't get it always whine about folks wasting money on this or that but intentionally forget to mention how wages for the Working Poor and Fading Middle-Class have gone either stagnant or declined for well over a Decade. Meanwhile the Wage Gap has moved from 40 to 1 to Well over 400 to 1. The 1% are quite happy that brainwashed morons are pushing for more support for those that don't need it aka them. They can continue to outsource our Jobs to Slave Labor overseas while making sure Workers here eventually experience the same fate.
So bottom line is this, increase your skill SETS so that you Maximize your Income Levels. The more you MAKE, the MORE potentially you have available to save and or invest for retirement all other things being equal. It matter not if you have a Govenment Job or a private sector Job, either way can be a honest day's work or just the opposite. You really should not care if others feel either way about which you have, it's income, take advantage of it. There is plenty of Corporate Welfare going around as there is of other types.
Go buy an island, make the rules and laws, develop your new country's currency and start your own printing presses. You can hail to yourself in front of a mirror every morning as the new President/King/Queen/Dictator/God or whatever you want to call yourself as the ruler of your nation. Congratulations!
Go do it now and stop whining!
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If you worry about money after the streetlights come on, these actions may help you rest easier.