In today’s increasingly global investment environment, it can be tough to know the best ways to invest money that will help you achieve a target retirement age. Any retirement calculator will reveal that financial security requires a solid plan – and often a willingness to look at things from a different perspective.
Whether you are hoping for an early retirement at 40, or are planning to work until at least 59 ½ in accordance with the rules of your IRA account, it’s important to have income-producing investments that will provide enough investment income that you could never outlive.
Whether you are just a few years from your ideal retirement age or have decades left in the full-time workforce, it’s never too early to start developing a clear understanding of how your retirement income will be generated.
“Determine what retirement planning phase you’re in”, wrote Market Watch. “Are you in the accumulation (the saving-for-retirement phase, or the decumulation (the retirement income withdrawal) phase?”
Click the link to see 5 Excellent (and Free!) Retirement Calculators recommended by Forbes.
Here are 7 essential investment strategies to help you avoid common mistakes and reach your desired age for retirement:
1. Don’t Give in to Early Retirement Pressure
In other words, don’t let outside influences tell you the retirement age that is right for your situation. No investment advisor has a crystal ball that allows him or her to know exactly what is best for you, so don’t give in to the pressure to make risky investments in order to meet some unattainable goal. And as lifespans continue to increase, more and more “seniors” are enjoying longer careers and greater earning capability than ever as their expertise gains in value.
“Think about what you truly want for you and your family”, wrote CNBC. “Work can often be one of the most rewarding aspects of life”.
If you feel this way about your career, or have always dreamed about taking up a new career upon retirement, start thinking about how you might continue to work in your later years as you near retirement age. This could mean transitioning into a different role, reducing the number of hours you work, or turning a beloved hobby into an income-producing second career.
2. Start Planning Now
Waiting too long to begin planning for retirement is one of the biggest mistakes investors can make. No matter how much money you have (or don’t have), it likely causes some level of anxiety. Especially considering the fact that only 38 percent of investors had a plan to reach their retirement goals in a 2015 Gallup survey!
“Stop procrastinating and start planning”, wrote CNBC. “The burden of financial stress is far worse than the upfront challenge of putting a plan into place”.
Start by writing down your current financial needs as well as your retirement goals. Also, find an experienced investment advisor to work with who can help you navigate the stock market, as well as professionals who can help you understand the growing list of attractive alternative investments – such as real estate – that can ultimately make the difference between reaching your target retirement age and being forced to work well past what you consider ideal.
3. Make Conservative Assumptions
Remember that things will always cost more than you think they will (or should), so don’t fall prey to relying on a flawed retirement plan that is made up of cash flow projections that make risky assumptions. Having unrealistic expectations could leave you facing a much harsher reality than the numbers seem to suggest.
“Don’t forget that, thanks to inflation, things will cost a lot more money in the future”, wrote CNBC. “Don’t assume that invested assets will grow at 10 percent every year”.
Also, you might need to reconsider the length of your retirement on the cash-flow projections your investment advisor is using, since medicine and technology are leading to increasingly longer lifespans.
4. Go Beyond the Numbers
Of course, it’s important to make sure you have enough money to live comfortable in retirement, but in order to really determine how much money you even need, you’ll have to venture beyond the math. Don’t forget to plan for enjoying a happy, purposeful life during retirement.
“Define what a truly successful retirement looks like beyond the dollar amount you’ll need to pay the bills”, wrote CNBC. “You need to find fulfillment emotionally and intellectually”.
Practically speaking, this means you’ll need to think about how you really want to spend your time once you retire and – perhaps more importantly – how you’ll make the transition and what you want to accomplish.
5. Consider Your Spouse
If you’re unmarried, skip to #6, but for anyone with a spouse this is a must-read. Too often couples have become disconnected throughout their working years, growing accustomed to daily routines and yearly patterns that will change drastically after retirement. Once work doesn’t take up most of your time, it’s important to talk about what that will mean for your relationship and your retirement.
“Well before you plan to stop working, have many conversations with your spouse about how each of you envisions retirement”, wrote CNBC.
Work to find common goals for the future and discuss the effects that no longer working full time will have on your marriage.
6. Establish an Estate Plan
Too many investors fail to go the next logical step beyond retirement to consider legacy planning. While you might have plenty of money to live on, do you know how what’s left will be transferred to your children without taking a major tax hit from Uncle Sam?
“At a minimum, make sure you have an up-to-date will that can carry out your wishes”, wrote CNBC.
Use other planning tools, such as trusts and life insurance, to ensure everything is transferred in the best way to your heirs.
7. Establish Short-Term Goals
All this talk of retirement can make it easy to forget that every successful financial plan is actually made up of a series of short-term goals. Also, don’t sacrifice your current financial and personal health to achieve some far-off goal.
“Be sure to keep some cash in the bank for emergencies, like a leaking roof or unexpected medical issues”, wrote CNBC. “Most important, make sure to plan to enjoy life even before retirement”.
How is your retirement planning strategy coming along? What challenges or setbacks have you faced? Let us know what you think in the comments!
Would you like to see even more smart investment strategies for retirement? Click the link below to learn how to ensure you have enough investment income to retire comfortably: