Did you know that the average American spends more time planning their vacations than they spend time planning their own retirement?1 Why spend more time on a 10-day vacation than a stage of life lasting 20-30 years? In this piece you’ll learn why it’s very important to focus on planning for retirement and how to start.
Why Make Retirement Planning a Priority?
Focusing on retirement planning can help you gain control over your life and your future. You can have more “say” in how your life plays out. We all have different goals and dreams, but the one thing they have in common is that there are steps that need to be taken in order to achieve them. A long-term goal, like retirement, becomes much more manageable if you can step back and take the time to map out the important actions required to reach your goal.
Retirement planning can also help give you peace of mind. Think about it for a second – are you going to be more worried about your future if you don’t have a plan or if you do? Think about how good it would feel to know that you had a plan in place. Think about how confident you might feel if you knew that you didn’t have to work full-time past your intended retirement age. Continuing to work after the age at which you intended to retire isn’t necessarily a bad thing, but not having control over how much you need to work in order to sustain your lifestyle isn’t ideal. A little preparation could go a long way in making sure that you have the proper pieces in place to put you on the right path towards your ideal retirement.
How to Prepare for Retirement?
So how do you take control, prepare for your retirement and work towards peace of mind?
The first thing you need to do is take a step back and look at the big picture and figure out exactly what it is that you are planning for. Everyone has their own idea of retirement and in order for you to achieve your goals and dreams you will likely have to follow steps as unique as your vision. The possibilities are endless.
Do you plan to:
- Stay in your home?
- Move to a warmer climate?
- Travel the world?
- Start the business you’ve always dreamed of?
A key to planning is being able to see the big picture.
Once you realize what exactly it is you are planning for, you want to analyze where you are today. This includes, but isn’t limited to:
- Looking up current balances of investment & retirement accounts;
- If you have a portfolio, reviewing your asset allocation;
- Examining Annuity & insurance policies;
- Assessing property values;
- Working on estate planning; and
- Getting a grasp of what you’re currently spending.
Spending is one of the largest drivers in determining whether or not someone has the resources to meet their future goals & dreams. In order to get an idea of what your spending might be in retirement, you need to take a good look at where your money is going today. The following steps can help you get the planning process started:
- Track your expenses over a few months;
- Analyze your spending patterns;
- If you need to cut back, identify possible areas; and
- Decide where to direct the extra cash.
I realize that it may seem difficult to look years down the road to determine what your expenses might be, but everyone does have their own spending habits and this is something that likely won’t change drastically once you retire.
After figuring out where you currently stand financially, you need to identify the steps that you need to take to get you to where you want to be at retirement. These steps may be relatively simple or quite drastic depending on how small or large the gap is between where you are today and where you want to be when you retire. If you are uncertain of what steps need to be taken, then you might consider working with a Certified Financial Planner™ (CFP®). Many components and processes are involved in a person’s financial plan and managing it all can be difficult. Even working with a planner on only a periodic basis could benefit you tremendously. CFPs® are required to take several hours of continuing education classes each year, so there is a good chance that they may know of various planning techniques that may be useful in helping you accomplish your goals.
Some may consider this process tedious or difficult, but just imagine how you’d feel if you had more control over your financial future. Having a clear path towards your ideal retirement will help prepare you for life after work and could help you reach peace of mind.
And the next time you sit down and start planning your next vacation, remember that there is another really long vacation that you need to plan for as well.