If you're thinking about retirement, there's no better time to get started than now. Don't wait and make it a New Year's resolution, don't wait until next month, make a plan today. You're never too young or old to get started. Here are five retirement planning tips:
1. Look into your employer's retirement benefits
Does your employer offer a pension or a 401k? If so, find out how you can earn your pension or contribute to your 401k. Many employers will even match 401k contributions up to a certain percentage. For example, if you contribute 5% of your gross salary to your 401k, your employer will contribute another 5%. Take advantage of contribution matching to accelerate your retirement savings.
2. Pay your future self first
Decide on an amount every month that you will put into an IRA. An IRA is a special savings account for retirement that is tax-deductible and tax-deferred. Open an IRA and have the amount automatically transferred to it every month. If you get a bonus or a tax return put half this money into your retirement savings. If you get a raise, increase your monthly contribution.
3. Seek financial advice
Get help from a financial planner or an independent broker-dealer (IBD). They will give you advice on investments depending on your age and future retirement needs. Thanks to new legislation called the fiduciary rule, financial advisors must give clients the best possible advice suited for them without any conflict of interest. You can trust the advice you receive so you can invest and plan with confidence.
4. Pay off your mortgage
After you've contributed to your 401k and maxed out your IRA contributions, the next plan of attack should be your mortgage. Any extra income from bonuses or raises should go straight to paying off your mortgage. There is no better peace of mind, especially during retirement when you're on a fixed income, than living in a home that is paid for.
5. Fake it until you make it
The best way to know how much money you need to live the lifestyle you want in retirement is rehearsal. Calculate how much money you will have in retirement to live on every month based on your current contributions. Use that amount as your budget every month, even if you make more money. Can you pay for expenses on this amount? Are you living the lifestyle you want in retirement? If you're not saving enough this rehearsal may be a good wake up call.
There is no better time to plan for your future than right now. Start planning your retirement today.