5 Financial Habits to Help You Retire Comfortably
Updated on Nov 02 2018
Retiring comfortably today requires a diligent retirement planning strategy as well as good financial habits. If you are looking to maintain the same standard of living in retirement that you have during your working years, here are some important habits to consider.
People who save enough money for a secure retirement often start saving at an early age and save consistently throughout their career. If you are approaching retirement and feel you haven’t saved enough, there’s still time to catch up; but you need to take be proactive with your savings and investment plan and take advantage of catch up contributions.
These simple habits will help get you on the right track for retirement success:
1. Take Advantage of Automation
Time and discipline are two things that many Americans don’t have, which is why automated finances are so important. The secret to saving is automation. When people save automatically, for a life event such as college, a mortgage or retirement—or all of the above—they actually get it done.
The earlier you set up automatic withdrawal into savings and investment accounts, the better, as compound interest works magic over many years. You can also take advantage of financial apps to help you organize your finances or even save leftover change you wouldn’t miss on a daily basis.
Remember that the challenge with finance is taking action. People know they are supposed to, but don’t do it — which is why automating is so important. Expert financial advisors can help you set your accounts up for savings and investment options that work for your unique situation.
2. Spend Less Than You Earn
Financial education is key when it comes to spending less than you earn. Many people don’t budget and instead live paycheck-to-paycheck or off their credit cards. They don’t realize that if you budget for your lifestlyle, you will probably have some leftover money to invest in your retirement.
3. Save for Emergencies
Sadly, many Americans are not prepared for emergencies, which can really wreak havoc on retirement savings. In fact, four in ten Americans can’t cover emergency expenses, according to a new report from the Federal Reserve Board. Part of a solid financial plan should be setting up automatic direct deposits from a paycheck into an emergency account. Ideally, you should have at least four to six months of monthly savings in case of an emergency, health condition or employment problem. Otherwise, you’ll deplete your savings and put your retirement at risk.
4. Invest Money for Later
A balanced retirement portfolio can help you prepare for your future. Every person has a unique situation and their mix will vary from conservative to risky investments, depending on their age, income and a number of other variables. A diversified portfolio will help you reduce risk and improve return, but your mix may change over time as you prepare for retirement. Make sure to educate yourself on your portfolio, the market and ask questions as financial security and knowledge go hand-in-hand.
Take advantage retirement savings plans that have tax and catch-up contribution benefits, such as a 401k or IRA account. A financial advisor can help you discern what investment mix makes sense for you.
5. Take Advantage of Social Security and Government Benefits
Social Security pays benefits that are on average equal to about 40 percent of what you earned before retirement. Timing your retirement age and Social Security benefit strategy can help you increase your benefit amount, so it’s important to do your due-diligence in figuring out how the benefit can work for you.
The government also offers many great benefits for retirees. From health care needs to financial or long-term care resources, there are wonderful resources to help seniors fund retirement through the government or private organizations.
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