Retirement Planning Secrets

How to make plans for the retirement you want, starting right now.

The biggest problem most people have with planning effectively for retirement is procrastination. Most of us simply don’t start early enough, so we’re behind once we actually start saving. Another challenge is planning for the kind of retirement you want, so you can get your finances in order before you ever hit your golden years.

So how do you get off square one when it comes to retirement planning?

  1. First, open retirement saving investment accounts and start saving. Don’t wait for you next salary increase or when you achieve total freedom from debt. Otherwise, you’re likely never to start saving.
  2. At minimum you should have a 401(k) or IRA account. If you have a 401(k) plan through your employer, take advantage now and make sure you familiarize yourself with the company’s 401(k) match policy. If you don’t have that option, then open an IRA. Even if you have limited funds you can open a myRA that is designed to help people just starting their retirement plan who may have limited income.
  3. Once you’ve start saving, start thinking about what you want to do. Start saving first so you can move forward, but then really plan out exactly what you want to do.
    1. Do you want to move or keep your home?
    2. Do you want to travel?
    3. Will having no job drive you crazy?
    4. If you plan on working, what do you want to do?
  4. Tweak your saving strategy and financial plans based on retirement dreams. If you’re planning to travel, you’ll likely need more money to make those retirement dreams come true, so you may need to increase your retirement account contributions. If you plan on staying in your home, see exactly how many years you have left before paying off your mortgage so you can make plans to eliminate the debt so you own your home outright.
  5. Talk to a financial adviser. People think financial planners are only for rich people, but even if you make a modest income you can benefit from the advice of a financial adviser. Take time to find a planner that fits your lifestyle and needs, then take their advice and run with it.

Are your credit cards holding back your retirement plans?

That may sound crazy, but it’s true. Credit cards are revolving debt, which means the payments increase or decrease depending on how much you owe. So if you’re carrying around a lot of credit card debt, then those bills are eating up income and preventing you from having the funds you really need to save effectively.

Even if you have limited income, saving for retirement is possible if you live on a budget and don’t allow debt to overrun your ability to plan effectively. Take a moment to calculate your credit card debt ratio – that’s the amount of credit card debt you have relative to your income. If you divide your monthly credit card payments by your total monthly income and multiply by 100 that’s your ratio.

You want to have a credit card debt ratio of 10% or less. So if you take home $1,000 per month, then your credit card payments should not exceed $100. If your ratio is higher than 10% then you’re spending more than you should on debt payments and you need credit card debt relief.

By using a relief option like debt consolidation, you can lower your monthly payments and make an effective plan for eliminating all of the revolving debt you owe. With those bills eliminated, you’ll have more money available to save. So if you have a credit card debt ratio higher than 10%, start saving what you can for retirement, then talk to a credit counselor to make a plan for debt elimination. Once your debt is eliminated, then you can increase your retirement savings accordingly.