For many of us, retirement won't be what Mom and Dad told us it would be. They worked for a single company for life and got a nice gold watch and a hefty pension when they left. What do we get?
Pensions are a relic of the past. Instead of a defined benefit plan, we have defined contribution plans -- our 401(k)s, 403(b)s, and 457 plans. Only our investing prowess will be able to sustain us in retirement. And get this:
• We're going to live longer, be active longer, and be retired longer than our parents were.
• We'll need more money to sustain us during our increased retirement years.
• Like it or not, a lot of us will have to work during our retirement years. What's up with that?
Not quite what you had in mind, is it? Obviously we need a plan. It may not have to be complex, but it will have to reflect the lifestyle choices we want to make with our retirement. We need to set goals and then work toward achieving them. Too often, we just put this on our list of things to do ... tomorrow.
Thrills, chills, and more!
OK, I'll admit it -- I think planning and budgeting are boring. There's no fun and excitement in creating a financial plan. But then again, there isn't much fun in hitting your retirement years and realizing you've got little -- or worse, nothing -- saved. By then, it's too late, and you could find yourself stuck without the option of doing what you want with your golden years.
So, how do we get past the boredom and get our plan started? The experts over at Motley Fool Green Light have made this easy by breaking it down into six doable steps:
- Picture your perfect retirement
- Decide where the money will come from
- Calculate how much you'll need to save
- Invest early and often
- Choose the best accounts
- Put the plan into action
This simple checklist to "Rev Up Your Retirement" is just one of many "Take Action" plans that you'll find in within the pages of Green Light. Want to get out of debt? Plan your estate? Find the right insurance? You'll find a bite-sized plan for each of these goals to print out and use to get things done once and for all.
If you're taking those steps, you're already ahead of the game. Many simply refuse to do anything. Those are the folks you see at your job who continue to work long beyond retirement age because they can't afford to quit. You don't want to be that person.
Planning for success
The pundits say, "That which you can visualize you can achieve." Planning your retirement isn't quite so easy, but getting it down on paper is a key first step. I like a written plan and keep my own in a binder on my desk, but you can always keep one in an electronic format if that's your preference.
To get started, figure out what you want, when you want it, and how much it's going to cost. If you plan on retiring in three years but don't have any savings yet, you'll need to reconsider your plans. On the other hand, if you know that you'll need $50,000 a year to maintain your current living standards and you can fund half of that with withdrawals from your 401(k), then you can figure out how much you need to invest each month to make up the difference. Putting it down in black-and-white helps make that number more concrete.
With that number in mind, though, survey your options. First, are you maxing out your 401(k), at least up to the amount your company matches your contributions? That's free money your boss is giving you, so don't squander it. Then consider your other investment opportunities like a Roth IRA (where your earnings grow tax-free) and a regular brokerage account.
Green Light professionals recommend putting away at least 10% of pre-tax pay, and 15% is better (and if you're late in getting started, you might want to consider bumping that up to 20% if you can). Paying yourself first by having your bank sweep that money into the savings vehicle of your choice will ensure that you get it done without temptation.
Speaking of getting it done, now's the best time to start! You know what you want, when you want it, and how you're going to get it. All it takes is putting the plan into motion.
A new gold standard
The golden years of Mom and Dad were a heckuva lot different than ours are going to be. Yet while it will be different, it can also be so much better. We've got more options available to us, as well as a recognition that just because we've retired doesn't mean we have to stop enjoying ourselves.
If you don't want to go it alone, the folks at Motley Fool Green Light have created step-by-step plans, worksheets, and online calculators to help you fully plan and organize your thoughts. There's a 30-day trial subscription available that gives you full access to making your own retirement better than the one that Mom and Dad enjoyed.