A huge barrier to retirement success is failure to plan. People too often find the whole topic exhausting, while the pressing financial needs of the day overwhelm our pockets and our patience.
Yet not planning is a critical mistake. As the years pass, you lose the natural investing edge of time. Compounding, the way that investments grow exponentially over time, is a huge advantage.
Feel like you’ve squandered it? Nonsense. You are very likely to live longer than you think, so even a mid- to late-career retirement plan can make a huge difference. Even if you’re plotting your exit from work, a plan will beat pure chance, hands down.
Here’s how to get started, no matter what your age:
1. If you are in your 50s
Many people think of retirement as something that starts at 65 and ends 10 years later. The fact is, the more years you live, the more likely you are to live even longer than the averages suggest. Bet long, maybe 40 years or more, and you can’t go wrong.
Rev up your workplace 401(k) to the max and try to add on to a Roth IRA as well. If money is tight, consider a part-time job just to fund your retirement planning. Money earning a market return will double every 10 years or so, so now is the time to sock it away.
2. If you are in your 60s
If you already have a nest egg, it’s prudent at this point to begin dialing back risk. However, if you know for a fact that you will work well past 65, and you feel your work income is secure, don’t be in a rush toward slow-growing investments.
Also, put off Social Security as long as you can manage. Leaving benefits to the maximum age to take benefits, currently 70, can increase your monthly payout considerably.
3. If you’re already in your 70s
You’re getting a late start, to be sure. At this point, saving in low volatility accounts for emergencies is likely the best move, but if you happen into a windfall, consider investing the money.
For instance, downsizing your home might generate some cash, as would an inheritance. If you get any money that you don’t need to spend and your short-term savings is in good shape, a small portfolio prudently invested will be a cushion against the risk of outliving your savings.
Whatever you do, don’t throw up your hands and simply hope for success. You can achieve a more comfortable retirement by setting goals and sticking to them, whatever the starting line turns out to be.