A few simple steps can make all the difference when it comes to being prepared for retirement. While it’s never too early to start saving for retirement it’s also never too late to evaluate your financial situation and make sure you are making wise financial decisions. Research shows that these simple tasks can dramatically increase one’s chances of financial success.
Rethink your relationship with money
Life coach Christine Hassler suggests that those struggling with money decisions start thinking about money as if it is a person. “How’s your relationship with George?” she asks, referring to President George Washington’s face on the $1 bill. In her book, 20 Something, 20 Everything, she suggests readers study their personal past with money. “If they don’t excavate what they believe and their sense of worth, they are unable to progress,” she explains. This relationship with money includes your financial situation growing up and patterns of spending. The very first step to fixing a dysfunctional relationship with money is to acknowledge its existence.
Get Organized
Your financial accounts most likely come with behemoth amounts of paperwork. You will need to hang on to important documents (some states require taxpayers to keep up to 10 years of filings on hand), but a great deal of your older paperwork belongs in the shredder. Keeping your paperwork in one secure and safe place can help you stay on track with your financial goals. One easy way to do this is to create a three ring binder with separate tabs for bank statements, Social Security benefits, estate planning, pension and retirement benefits, and investments.
Analyze your spending
Using one of the many free online tools available such as Mint.com, check where your money is going and what areas you may be able to cut back in to add more to your savings. Many banks also offer free tracking software through online accounts, along with automated savings reminders. Remember our goal is to collect capital, not things, analyzing where your money is going is the best way to start directing it into the right direction.
Automate your savings
Online investment accounts make this technique easy: Sign up for an automatic monthly ACH transfer into your brokerage account. You can also transfer funds directly from you paycheck so you never see the money, which means you won’t be tempted to miss it. Check with your human resources department, they might be able to set up an automatic savings account through your paycheck in addition to your automatic retirement savings.
Find your retirement number
Online retirement calculators, such as ours that can be found here, make it easy to estimate how much money you need to have saved before you retire. Once you have your retirement number, figure out how close you are to reaching that goal and what needs to change, such as working longer or saving more, to reach it.
Pay less in fees
Fees are often overlooked when it comes to investing and banking. Think tank RAND calculates that just a 1% difference in annual fees adds up to $3,380 after 10 years on a $20,000 account balance. Consider whether you should shift into lower fee funds or learn how to manage your portfolio.
Pay less in taxes
Make sure you’re taking advantage of all the tax breaks that may be available to you. Retirement savings accounts such as 401(k)s and IRAs offer a variety of tax advantages. Also try checking with your human resources department to see if there are employee benefits that you are not taking full advantage of.
Create an estate plan
You don’t have to be rich and famous to need an estate plan. Aside from avoiding probate, which is the most common reason people opt to create an estate plan it can also reduce state and/or federal estate taxes as well as help your loved ones avoid a mess sorting everything out on their own. Many people seek the advice of an estate planning attorney after experiencing or seeing a close friend experience a significant waste of time and money due to a loved one’s failure to create an estate plan.
Evaluate when to take Social Security
The longer you wait to claim benefits, the more you can collect. For full benefits recipients need to wait until they reach their full retirement age. We have written a white paper on evaluating when to take Social Security, it can be found here.
Keep working in retirement
The combination of today’s economic environment and extending life expectancies means that careers are no longer ending at 65. Many seniors have opted to continue working beyond official retirement, and often in new fields. If you are approaching retirement, and have not achieved your retirement goals it may be time to start taking steps to prepare for work during retirement.
With the New Year right around the corner there isn’t a better time to evaluate your finances. No matter what age you are or how far you may be from retirement, these helpful tips will help you get or keep your finances on track.
