Smart Financial Strategies for Every Age and Lifestyle
Countdown to Retirement
Have you heard the story about a couple who asks their financial planner how much money they need to save for retirement? The planner replies, “It depends. How long do you plan to live?”
Sarcasm aside, it’s a serious question more people should be asking. Nearly half of all Americans are not saving any money for retirement, and the rest are not saving enough. That’s according to a survey of more than 1,000 U.S. adults. “In fact, only one in 10 Americans save 15 percent or more of their gross income for retirement; the amount industry experts recommend people set aside in order to build adequate savings.”
We get it. Saving for a time in the future that can be decades down the road is hard when you have a home mortgage, car payments, and credit card and student loan debt staring you in the face today. But, the sooner you start saving for retirement, the longer your money has to grow.
In a perfect world, you would start saving for retirement in your ‘20s and adjust your investment goals and strategies as you age gracefully into the sunset of a well-financed post-work lifestyle. But seriously, we all know life is rarely perfect. The best laid financial plans can be derailed by all kinds of unexpected situations from a job loss or health issues to a kid that’s been accepted to an Ivy League college.
Not to worry. It’s never too late to start saving for retirement. Here are some smart financial strategies for every age and every lifestyle:
- Student loan debt – For many young people, a student loan is their first experience with debt. Resist the urge to postpone retirement investing in an attempt to get out from under student loan debt more quickly. And, at all costs, avoid getting behind on your student loan payments which can have a negative impact on your ability to establish credit. One solution to consider is a biweekly loan payment strategy that can help pay off student loan debt faster, make sure your payments are made on time, and help you save money on costly interest payments.
- Auto loans – It’s exciting to purchase your first car and easy to get distracted by all of the different makes and models, colors and accessories. It’s important, however, to do your homework about the total cost of car ownership, which goes far beyond the sticker price. Fuel costs, maintenance, insurance and repairs can quickly add up. Edmunds and Consumer Reports are two good sources to research the multi-year cost of ownership.
- Employer investment programs – If you are fortunate enough to have the opportunity to participate in your company’s investment plan, do it. If your employer offers a company match on 401k contributions, even better. Try to contribute the maximum that your company will match. This is one of the few “sure bets” in the world of investment.
- Investment management – If you started investing for retirement in your ‘20s through your employer’s 401k plan, you should have the start of a good nest egg. Now is the time to begin evaluating your asset allocation on a regular basis as your life circumstances change. It’s also a good time to consider taking on a little additional risk for potentially higher returns.
- Mortgage debt – Welcome to the decade of home ownership! On top of mortgage payments, the additional costs of homeownership can come as a surprise. Furnishings, repairs, utilities and other incidentals can really add up and take a toll on your retirement savings. A biweekly payment strategy can help you pay off your mortgage debt as quickly as possible.
- Home equity – As your financial responsibilities increase, you may be considering refinancing to tap into your home equity. Think twice. Doing so resets the clock on your mortgage terms and could result in paying off that new mortgage well into retirement. Another alternative is a home equity line of credit (HELOC) that acts more like a revolving credit line that can be accessed as needed.
- Retire your debt – Hopefully, you’ve reached your peak earning years. Now is the time to aggressively pay down credit card and other high-interest loans that are eating away at your net savings and investment returns.
- Asset protection – This is also the time to refocus your retirement plans on ways to preserve the assets you’ve worked so hard to build for the future. Look into adjusting your retirement portfolio to include more low-risk investments such as bonds, certificates of deposit and money market mutual funds.
Congratulations! The long-awaited retirement you’ve been planning for is finally within reach. Pursuing activities you enjoy and spending more time with friends and family is the payoff for all the smart financial decisions you’ve made in the previous decades.
- Social Security – This is the icing on the cake of your retirement savings. You can start taking monthly benefits at any point from age 62 up until age 70, but your benefit will be higher the longer you wait. Check out the Social Security Administration’s retirement benefits planner to learn more.
- Medicare – With the high cost of health insurance, this benefit can provide significant savings, but it also has limitations, especially when it comes to in-home and long-term care. Supplemental insurance can cover some of the gaps, but not all. The Medicare website provides good information on what Medicare and Medigap supplement plans do and do not cover.
Your financial life can sometimes feel like a winding road with twists, turns and surprises around every bend. But, if you stay the course and arm yourself with good information, you can reap many rewards throughout your life’s journey.
For more smart savings and investment strategies, and sensible debt management practices, download our FREE e-book Countdown to Retirement or visit us at AutoPayPlus.com.