Retirement planning can be stressful. After all, many people are saving too little and studies have repeatedly shown that Americans fear they're not likely to have enough money to last throughout retirement. If you're worried about running short of cash, you may be dreading a time in your life that you should be looking forward to.
While it's really common to stress over retirement savings, I have no worries about my plans for the future. In fact, I never spend a moment thinking about saving for my later years. There are three primary reasons why.
1. I've automated my investing
Most people get regular paychecks on specific days. Although I do freelance work, I also get funds deposited at specific times from the companies I work for. On the days when I know money will be deposited, I've set it up so some is automatically moved from my bank account into my investment account.
The money disappears as soon as it's put in so I couldn't spend it even if I wanted to. Because of that, I don't have to control my spending and try to make sure I have enough left over to invest. I don't have to manually move money over to my retirement accounts, either -- the money just goes where it's supposed to with no intervention and I don't have to think about it.
If I had a traditional job and a workplace 401(k), this would be even easier since I could sign up to have money taken right from my paycheck. If your employer offers this option, take it. If you don't have a 401(k), you can do what I do and set up automatic contributions for yourself.
2. I'm saving more than the recommended percentage of income
While most financial experts traditionally recommend saving 10% of your income for retirement, evidence suggests it's better to save about 15% to 20% given longer lifespans and market conditions today. I err on the side of caution and save 20%, to make sure I'll have enough.
If you have an employer match for 401(k) contributions, you can factor that money in when figuring out the total percentage of your income you save. But if you want to avoid worrying about having enough as a retiree, aim to save a larger percentage of funds than is often advised.
You won't have to stress as much about market downturns if you're putting more into your accounts, since larger investments can lead to a bigger nest egg, even if your return on investment is lower than anticipated. And if something unexpected happens, such as a job loss or income cut or forced early retirement, the extra money you've put in means you should hopefully have enough to weather the storm.
3. I've invested in a diverse mix of funds so I don't have to watch the market
The stock market has been on a wild ride in recent days, thanks to the novel coronavirus. But I haven't done more than briefly glance at my investment account online and haven't made any changes.
That's because I invest in a wide range of different kinds of assets in different sectors. By spreading my money around, I reduce the losses I incur when some assets perform poorly because there will be others that do better.
I'm also confident I've built a diversified portfolio that will perform well over the long term, so I don't have to worry about short-term market declines.
If you want to do the same, make sure you're investing the right percentage of your assets in the stock market (subtract your age from 110 to figure out what that is). And spread your money around so you have some investments in big companies, mid-sized companies, small companies, and emerging markets.
Are you ready to stop worrying about your retirement savings?
It feels good not to be worried about retirement savings. While it took me a while to get to the place where I was confident I'd have enough for a secure future, I was able to do it by making lifestyle choices and ensuring I made saving for retirement a priority.
The steps I took aren't impossible. In fact, they're things that anyone could do. If you're ready to stop worrying about your own nest egg, you may want to try them out for yourself.