It’s never too early to start planning for retirement. Knowing what strategies to employ at each phase of your retirement planning will help you develop an overall strategy that will work no matter what your age. With that in mind, BusinessNewsDaily asked three financial experts what workers should do before turning 40 to ensure they retire with enough savings.
Fix your plan and know your financial situation
Before thinking about retirement, all workers need to first understand their financial situation and, in particular, their financial obligations. Part of that understanding comes from knowing that financial plans may shift and change as you get older. For that reason, workers would be well served by amending any existing plans and continuing to monitor their financial situations as they get older.
"Too many people look at retirement as a subjective thing that is too far away and something they don’t need to worry about now," said James Roberts, partner at Roberts and Taylor Wealth Management Group. "You need to plan for retirement the same way you prepare for a house, knowing you need a 20 percent down payment. Then you look at your budget and see what you need to save to reach it. If you do that, you will be more likely to [be able to] afford the house you want, and the same is true for retirement."
Roberts says people who either start or continue to save in their thirties must focus on establishing a pattern of good spending habits in order to reach their retirement goals.
"If you wait until later in life to form a plan, your financial spending habits have been determined for several decades at that point," said Roberts. "It is hard to teach an old dog new tricks. If you can change that behavior at 30 and spend the next 20 to 30 years focused on your retirement goals, you will be more likely to reach them."
Saving may be crucial to retirement planning, but it is also possible to over-save. Even though over-saving may seem harmless, Kevin Bunkin, senior associate at Creative Financial Group, says the practice carries some pretty serious negative consequences.
"It is important to enjoy life, and it is harmful to set a goal that is not achievable," said Bunkin. "When you add on the expenses of life, such as raising a family and paying down a mortgage, you can really get into trouble if you over-save. People who over-save, quite frankly, may not be able to enjoy themselves because of their savings goals."
To combat over-saving, Bunkin suggests that all workers have a clear and, most importantly, reasonable view of retirement.
"It comes back to your vision of retirement," Bunkin said. "Everybody has to have a firm handle on where money is going. Everyone knows where the money is coming in from, but you also have to know where the money is going. Having a budget is crucial in that. Don’t be afraid to extend retirement out a few years. The reality is that people are happy when they are productive."
Keep accurate records
Another crucial element of successful retirement planning is being able to track your progress. One way to do that is to keep accurate records of your finances and your financial situation.
"A habit to develop in mid-career is good record keeping," said Todd Tresidder, retirement coach and founder of FinancialMentor.com. "You want to run your finances like a business, because that’s exactly what it is, a financial-management business. Maintain expense records showing how much you spend and where it all goes so that you know how much income you need to retire securely."
Not only will accurate records keep you organized in your retirement savings, but they will also help you keep a close eye on your investments, Tresidder says.
"Keep your investment records efficiently organized, and monitor the progress of your assets," said Tresidder. "Treat your money with the respect it deserves, and it will respect you back by sticking around and growing in your accounts."
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