With the Great Recession still lingering, many people face difficulties in managing their cash flow, assets and debts. Planning for retirement has gotten a lot more complicated in the last two years for millions who have lost jobs and/or seen the value of their homes and retirement accounts dwindle. Some who a short time ago thought their Golden Years appeared rock solid now face the possibility of outliving their money. For many, these worries are profound, and they are very real.
But it’s not too late for most people who still have earning years remaining before retirement to recoup a large chunk of their nest egg. For one thing, many workers still have the opportunity to contribute to their employer-sponsored 401(k) plans or Individual Retirement Accounts. For another, the stock market, on which at least a portion of these retirement-savings accounts are pegged, has seen a hefty 85-percent bounceback in the 13-plus months since the market low of March 2009. Continued savings while working and prudent investment are essential. Here are a few key steps you can take to build an effective income strategy for retirement.
- Successful planning. A realistic household budget is essential. It should be in writing so you can refer to it often and allow it to define your goals. A life without planning is like an airplane without wings. Success often is found in good planning. You should start making retirement-savings plans as early as possible in your working career. Your focus during the income-earning years should be on saving rather than spending.
- Your rate of spending always should be less than your income. Many people prefer to appear wealthy at the expense of actually being wealthy. This can lead to overspending that does not allow you to accumulate wealth during your earnings period, and the same lifestyle may continue during retirement. This should be brought under control. The main culprit for appearing wealthy, rather than being wealthy, is consumer debt.
- Invest as much as possible during your working career. This seems like a no-brainer, and often is easier said than done, but it really is crucial. That will enable you to fall back on accumulated assets in retirement, such as real estate, from which you can get rental income as well as draw on properties’ appreciation in value; fixed-income instruments and deposits; and stocks, bonds and commodities such as precious metals. As you draw closer to retirement, most financial advisers suggest that you move to a more conservative mix of investments with less money tied up in stocks and more in bonds, Treasury notes, certificates of deposit and the like. Younger workers have the luxury of time in investing a greater proportion of savings in the more volatile stock market. Most employers offer retirement-savings plans with tax deferral so that you save the funds without paying taxes on it until you actually need it. The assumption here is that you likely will be in a lower income-tax bracket during retirement.
- Savings that cannot easily be touched while you’re working are the best ways of creating a sound retirement. Make use of the various plans that are available to have long-term savings starting early in your earning period, so you can have confidence that you will not find yourself and your loved ones in want during your retirement.
- Be extremely careful where you save and invest your money. Well-planned and safe investments are crucial with the ever-growing presence of Web scammers and fraudulent wealth-management advisers. Build up a certain level of trust in a safe investment plan that is highly regarded and accredited before you invest your savings. This is a primary key to a bright retirement strategy.
Apart from these steps, there is always the thought that everything we do is for the benefit of a safe and healthy life for ourselves and our loved ones. So, value life more than wealth, while keeping in mind that wealth is meant for life rather than life for wealth.
