The Most Valuable Retirement Planning Tool You Can Use Today

Source: Flickr / Ken Teegardin.

What constitutes a "comfortable" retirement? If you are a baby boomer, chances are you have been asking yourself that question quite a bit lately. Guideposts abound, but the real answer to that question is often murky, since it involves the future - an unknown quantity for everyone.

In reality, only you can decide what retirement looks like. Your own judgment and attitude toward retirement planning can make a huge difference in the way you make decisions, and a hefty dose of common sense will likely get you to where you need to be.

Here are a few tips on how self-direction and logical thinking can help you to build a nest egg that will carry through your Golden Years in style.

It's never too late to start planning
If you are a boomer in your early 50s and haven't begun planning, don't panic - it's not too late. Actually, being older can be an advantage, since you now have a better idea of when you will want to retire, and what your expenses will be.

Some simple changes can help you get started. If you have a 401(k) plan where you work, make sure you have enough pre-tax earnings put into the fund to get your employer's full matching amount. Check with your employer to find out what percentage of your salary you will need to sock away to take advantage of this benefit.

Individual Retirement Accounts are great retirement savings vehicles. Traditional IRAs allow you to deduct the amount contributed in a given tax year from your income, giving you a tax break. Roth IRAs are not tax-deductible, but qualified withdrawals are tax-free. Distributions from traditional IRAs are taxed when withdrawn - at which time, perhaps, you will be in a lower tax bracket.

Even with a late start, these accounts can add up. At age 50, you can put away an additional $1,000 per year, up to $6,500 total in your IRA accounts, as long as you qualify. According to, doing so for 15 years could conceivably net you nearly $175,000 from a traditional IRA. If you're married, your spouse can do the same. Not bad for a late boomer-bloomer!

Don't let others tell you what you need
Everyone knows someone that has a great tip for boosting your retirement account, and chances are they will be glad to share it with you. If you are older and nervous about not having enough to retire timely, you may be more susceptible to risky retirement schemes. Even those that don't rise to the level of an outright scam could cost you precious retirement dollars.

Know your limits, and go with your gut. If you are risk-averse, don't be talked into a riskier scenario that stretches your comfort levels. If you can handle a more aggressive portfolio, go for it - but, make it your decision, based on your own informed judgment.

Base your retirement budget on your own lifestyle
You know best what expenses you need to plan for, and which can be eliminated prior to retirement. Some experts, for example, advise against paying off a mortgage prior to retirement, opining that keeping that money liquid is a better bet.

If you have crunched the numbers and don't agree, go ahead and plan to pay off your loan. Start early, and make it as painless as possible by paying an extra mortgage payment or two each year before you retire. Doing so can take years off of your loan term, and is another way to invest in your own retirement.

Every investment requires due diligence, and planning for retirement is no different. By taking charge of your own financial well-being, you will likely enjoy a long and happy retirement. When it comes to long-term planning, a healthy dose of common sense goes a very long way.

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