Retirement planning is central to having a happy golden years. Source: AAG.com

There are very few things as important to the average American as retirement planning, yet most of us don't put nearly as much time and effort into it as we should. I get it -- it's a big deal, and you want to make sure you do it right. Unfortunately, this leads way too many people down the path of not doing enough (or sometimes anything at all), or completely relying on a professional whose interests may actually be in conflict with yours, preventing you from getting the best returns. 

When you're talking about something that takes decades, like creating a retirement nest egg, even a few percentage points in lower returns can mean tens of thousands of dollars less money when you reach retirement. 

Retirement planning can be complex, but it's not nearly as difficult as the pros would have you believe. With that in mind, here's an overview of some of the keys to solid, long-term retirement planning. 

Working within what you can control 
The best place to start is a long-term strategy that's built around maximizing the things that you control. This includes simple things like:

  • Taking advantage of employer benefits like matching contributions
  • Utilizing tax-advantaged individual retirement accounts like Roth and traditional IRAs for additional savings.
  • Eliminating expensive debt.
  • Creating an emergency fund.
  • Developing healthy saving and spending habits before you retire. 
  • Not ignoring the risk of death. 

Let's take a closer look at each of these things.

Don't skip free money 
One of the best ways you can jump-start your retirement savings is by maximizing benefits your employer provides. The most common is matching contributions to your 401(k) or SEP. This is typically done through matching a percentage of your contributions, up to a certain percentage of your salary. 

For example, if you make $50,000 per year, and your employer matches 50% of your contributions up to 5% of your salary, that's an extra $1,250 every year in free money. It may not sound much, but this is where the power of time works to your advantage. If you were to get a $1,250 employer match at age 30, it would be worth $38,600 at 65 based on the historical 10% rate of return of the U.S. stock market. And that's only one year's match.

If you were to capture that match every year from age 30 to age 50, it would be worth $367,000 based on the market's historical rate of return. That's above and beyond the value of your actual contributions. 

Saving even more? Use a tax-deferred account 
If you're able to contribute above and beyond what you put in your 401(k) or SEP at work, a Roth IRA is probably the best place to contribute. In 2015, you can contribute up to $5,500 ($6,500 if you're 50 and up), and once the money is in the Roth, you'll never, ever pay taxes on that money (or your gains) if you take distributions in retirement.

Make too much to contribute to a Roth? You can still contribute to a traditional IRA and grow your money tax-deferred, only paying taxes on distributions in retirement. 

Spending, debt and savings 
Retirement planning isn't just about how much you set aside for retirement. It's also about making responsible decisions that will sustain your ability to save, keep you from having to dip into retirement savings in an emergency, and also set you up to live within your means when you do retire. 

This starts with avoiding high-interest debt, and paying it off if you have any. Think about it this way: If you're paying higher interest on debt than the returns you're getting on your savings, you're going backwards. In the long run, you'll get farther by paying off that debt first, even if it means you have to temporarily reduce how much you save for retirement. 

Similarly, an emergency fund is an important safety net you may never use, but if it prevents you from having to dip into your retirement savings -- which can result in major tax penalties -- to make ends meet, you'll be glad you had it. 

One of the most valuable retirement planning steps that most people don't take? Developing better spending habits early. 

The sooner you develop spending habits that will work in retirement, the better your retirement will be. It'll also free up more money you can add to your nest egg, meaning even more freedom in retirement. 

Planning for the worst 
It can be hard to broach the subject with your loved ones, but rest assured that talking about it -- and putting a plan together -- doesn't increase your odds of dying any more than ignoring it reduces the odds. Face it -- we're all going to die. And while you can't be replaced, your income can be. 

There are a lot of options, including whole and term life, and depending on your age, income, and net worth, different choices will make sense for different people. It's also worth taking a look at long-term care insurance, considering that about two-thirds of retirees will need some sort of long-term care, and Medicare, Medicaid, and Social Security do not pay for this kind of care. 

The bottom line: Get involved, have a plan, make it a habit 
Some of these topics can be daunting, I get it. But the reality is, the more engaged you are in your own retirement planning, the more likely you are to reach your goals. 

It will take some time and commitment, especially to get started, but once you have a plan in place, it gets easier and will take less time than you'd expect. Considering how important it is to make sure you have what you'll need when you need it the most, it's worth every second you put into it. 

Some helpful links, for you to learn more about:

- Annuities

- IRAs and 401(k)s

- Trusts


You can't ignore yourself into a great retirement. Make a plan and get involved! Source: Pixabay.com

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