Easy Steps for Successful Retirement Planning in Today’s Changing Financial World

You have worked hard and built a life for yourself and your loved ones—a life filled with happiness and achievements. But as you think about retirement, you start aiming for different goals and dreams. That’s great! But to live your dreams after retirement, you need to have financial independence. 

Let me walk you through the best ways to rock your after-retirement life, a feat only achievable when you’ve got that financial freedom tucked away. Follow this guide to say goodbye to your financial worries and get “happily retired.”

What Is Retirement Planning?

You might think, “Retirement planning sounds about as fun as watching paint dry.” But think about it this way: it’s like planning the best long-term vacation you’ll ever take. When you retire, you’re essentially trading your 9-to-5 grind for a life of fun and freedom. 

So, what plans do you have for retirement? If you ask me, I am picturing myself sipping a piña colada while watching the sunset on a tropical beach.

Sounds great, but how will I get there? Of course, I need a certain amount of money to live my life, whether ideal or ordinary. After all, I am retiring from work, not from my life. 

When To Start Planning for Retirement?

It’s never too early to start financial planning for your golden years. Today, planning for retirement has become more important than ever. But here is what you might not want to hear– it has become more difficult these days.

Why? First of all, life expectancy is increased. If you are in your 90s, consider the money needed to get there. You’ll need more money if you live longer.

Besides, bond yields have lowered, so you are less likely to expect a double-digit return for buying a few fixed-income instruments. More so, companies are now moving away from defined benefit pensions to defined contribution plans, which are more about market ups and downs.

So, the best bet is to keep some money for your immediate needs aside and start stacking up for your retirement in your late 30’s or early 40’s. Keep saving until you decide to retire from work.

Along the journey, keep your “stealth wealth” mode on until your retirement and leave folks questioning, “How can he afford to retire when he can’t even afford a pair of jeans?” Then, take off your mask, reveal your millionaire self, and enjoy their facial expressions. But to get there, planning for retirement is a must.

Things To Keep In Mind When Getting Started

So, roll up your sleeves and start planning for retirement. But wait, do you know how to start the right way?

Planning for retirement should be thoughtful. You should know what you have and need and add everything in your retirement planning that offers financial benefits, such as social security spousal benefits. 

Here are some other things to keep in mind:

Create a Budget

First things first, create a budget. Track your income and expenses, and be real with yourself about where your money is going. Are you spending a little too much on fancy coffee or sneaky online shopping sprees?

Well, I do that, too, but only when I get “extra money” from things like new credit cards with bonuses. But, if you are spending too much from your regular income, then it’s time to cut back on unnecessary expenses. 

Set Automatic Transfers

I know I can sometimes get rebellious and spend what should have gone to my savings account. So, I avoid this from happening by setting automatic transfers. This is a good idea for everyone to keep piling up your savings account.

This way, funds you have planned for the future will automatically transfer into your investments. 

Pay Down Debt

Retiring at 65 while still having the debt hounding me is the last thing I can imagine. You also don’t want to pick up calls from annoying creditors after retirement, do you? Right, so pay your debts while you are earning.

This includes credit card debts, mortgage and car loans, student loans, etc. Make a strategy to pay off all your debts and enjoy your non-earning years debt-free. 

Keep an Emergency Fund

We all know life can throw curveballs: unexpected medical bills, car repairs, etc. That’s why you need to keep an emergency fund, so you won’t have to dip into your retirement savings every time life gets a bit crazy. Keep three to six months’ worth of living expenses tucked away in your emergency fund.

How to Invest from Your Retirement Savings? 

You can set aside a certain amount of money but likely can’t meet your goals unless you put that money into the market. Here, compounding comes to save you. 

Say you invest $1,000 in a magical fund with a 7% annual return. After one year, you’d have $1,070. But here’s the fun part – in year two, you’ll earn interest not just on your initial $1,000 but also on the $70 you earned in the first year. So, you’d have $1,144.90. And this keeps happening, creating a beautiful snowball of wealth as the years roll on.

No matter what account you use, your profits will compound over time (though losses can also compound, but luckily, markets have climbed).

Retirement Saving Accounts

One fantastic way is to contribute to tax-advantaged retirement accounts, like a 401(k) or an IRA. By doing this, you’re lowering your taxable income today while setting yourself up for a lower tax bill in retirement. 

Popular Investment Options

A few years back, investors would prefer a mix of mutual funds with 40 percent bonds and 60 percent equity. Some of my friends like this option today, as it offers growth from stocks and safety from bonds. 

Stocks for Growth

Whether you buy them directly or through mutual funds, stocks have great growth potential. If you buy stocks in your 30s and retire in the 70s, your money is most likely to soar in these forty years. The best way to reduce stock volatility risk is to invest via diversified equity funds instead of single-stock investments. 

Bonds for Safety

Thankfully, bonds come with less risk of dropping down. You lend money to the government or a company and get a certain annual amount based on a specified interest rate. After completion of the bond period, you get your money back.

Sounds great? No risks of liquidity and a fixed income each year? Yes, it’s not picture-perfect. Interest rates are decreasing, and bond yields are increasing, which lowers bond prices. Still, you can turn to bonds if you have any trouble with stocks.

Alternative Asset Classes

You could forget bonds and stocks and invest in other commodities, like gold, silver, and oil, as their prices keep rising in recessions. However, seeking professional guidance is always a good idea before going for any “out of the box” investment. 

Have a Happy Retirement

For a happy after-retirement life, keep an eye on your budget and invest smartly. But that’s easier said than done. While planning for retirement, you might encounter unexpected twists and turns; efficiently dealing with them will be the best bet.

I have managed to overcome these challenges and secured a lumpsum amount for my golden years. And honestly, it’s not that difficult. You just need to be persistent and proactive while planning for retirement to have a happy after-retirement life. 

This article originally appeared on Wealth of Geeks.

About the author: Nirav Shah is a neurologist and served as the stroke director of Swedish Neuroscience in Seattle, the largest stroke program in the Pacific Northwest. Nirav also started a tech company called Alertive.com and sold it to Carbon Health to achieve financial independence to retire early (FIRE). He is passionate about helping physicians and others achieve financial freedom and optional retirement so they can pursue their dreams and aspirations.