For this section in our 52-Week Take Back Your Finances Challenge, we want to talk about retirement! It’s a scary word to some, a dream word to others and an anxiety-inducing dread for many!
But no matter your thoughts on it, you need to think about it. That’s honestly our goal for this week: we want you to think about it, research it and understand a few things about retirement so that you are not caught by surprise or off-guard by it.
So read on as we share a few key thoughts about retirement from our perspective. But we encourage you to talk to a licensed professional regarding options and smart moves in your particular area. We are just going to share some broad generalizations regarding overall smart outlook on retirement investing and planning.
Our Top 10 Retirement Rules To Consider:
- If you work for a company that does match into a 401k, it should be a no-brainer to invest money into your company’s retirement match amount (up to the full match amount) but not necessarily more than this.
- Don’t plan to make extra investments beyond the company matching contribution until you are debt-free, excluding your home. Being in debt is a far greater liability than saving a little more for retirement at this stage.
- Regarding your home, think of this as a part of your retirement plan. No one in retirement wants to pay a mortgage (nor is it smart). Investing in a home is a smart retirement plan, so look at ways to make sure you can have this paid off before retirement hits and how long this will take. A paid off home is worth a lot more in retirement stage.
- Once you are debt-free (again, excluding your home), you should build a nice savings (a security fund, of sorts) no matter your age. So be sure that you are focused on building your savings account to at least the 6-month of income mark before adding more to retirement investing. We think the suggested 6-months of savings is a great post-consumer debt savings goal as shared by professionals like Dave Ramsey.
- Work harder when you are younger and when you are able and then use that money to invest and save for retirement. You’ll be surprised at how much larger your retirement account will be the earlier you start saving.
- Learn to live on less than you make now. Learn to be happy spending less than you make and just “get use to it.” This means that you will naturally have more for retirement and when you get to retirement, be use to living this way.
- Consider extra needs in retirement, like medical care, assisted living care, etc. This is where it is very important to talk with your children. We encourage families to care for their elderly parents as not only does this mean more money to be passed down to the generations, but the things you learn and gain from your elders is priceless. It’s a gift to be able to care for them and a great example to set for your own children too. This is part of a good retirement plan.
- Once you are debt-free (minus home mortgage) and have saved 6 months of income, a good base goal to follow is the 15% rule. 15% of the household income should be invested into a retirement plan.
- As far as how the 15% should be split, again, maxing your company’s 401k match program is smart and then investing in other sources like a Roth IRA, Mutual Fund, etc. (research your best options!)
- Failing to plan is the worst plan of all and never think it’s too late to make a plan! You can always do something!
So this week’s task is to look at these 10 points above and to calculate how far you are from achieving each one. Some will be easy to investigate and answer (like #1) and others may take more time to complete (like #4).
In addition, answer these questions:
- What are we doing for retirement now?
- In our current situation, what can we start doing or adding that is reasonable?
- Do we have debts or any savings that we need to put extra focus on before adding extra into retirement?
- What are extra needs we may need that we need to look into?
- If you are investing/saving for retirement on the level you hope, are you reaching your goals so far? Are adjustments needed?
- Finally, with your housing, medical and extra needs considered, how much do you think you will need?
Next week, we will answer more questions and do some calculations to help you achieve your goals.
We also think that looking at your retirement plan every year is very smart because life changes and life changes fast! Retirement planning and investing needs to be regularly evaluated.
Here’s a couple of additional articles to help you plan for retirement wisely:
- Forbes.com – It’s Never Too Late To Plan for Retirement (tips for the 50’s, 60’s and 70’s)
- DaveRamsey.com – The Truth About Retirement (Good general tips!)
Need to catch up? Come join us on this challenge from the very beginning by clicking on the 52-Week Take Back Your Finances Challenge and sign up to start receiving your automated challenge from the very beginning!
One final thing…we also have a Facebook Group where you can engage in discussions, receive encouragement and talk to others that are participating in the challenges too for more ideas! Head to the Be Intentional with The Thrifty Couple Facebook Page HERE and ask to join us there! You can also invite friends and spouses too!
Disclaimer: We are not licensed financial planners. We are only a couple that have been just a hair-breadth away from bankruptcy and found our way out of debt with a goal to now help others. Please make sure to consider any advice given on our site and in this challenge as tips we have used ourselves; they may not work for everyone. If you have questions please make sure to contact a licensed professional.