Laying The Foundations For Your Dream Retirement
In a volatile economy and uncertain market, one of the grandest acts of defiance that one can assert over their precarious fiscal landscape is to take their financial well being into their own hands. Easier said than done, right? But it can be done, especially when we make judicious fiscal and lifestyle choices that are clearly aligned with our goals. Unfortunately, for most of us, the realities of the financial climate are against us. In the gig economy more and more of us are resorting to self employment in a difficult job market and as such may not be saving adequately (or at all) for the future. Sure, there’s an argument for enjoying your money while you have it, so long as you’re doing so in a way that will at least enrich or improve your life, rather than chasing the fleeting thrill of consumer capitalism that inevitably leads to little except the grinding comedown of buyer’s remorse.
Most of us endure long hours and challenging working conditions because we hope that we will be rewarded for our labors with a long and luxurious retirement. While that’s certainly the dream, we must not fall into the trap of assuming that we are entitled to it or that it will fall into our laps. If you want a dream retirement full of all the luxuries life has to offer, you’re going to have to earn it. Here’s how…
Have a plan
How much do you need to facilitate your dream retirement? How long will it take you to accrue that amount? Do you currently have the savings and investment infrastructure to facilitate that? Do you need to make more money or save more to get there? These are all incredibly difficult questions to answer if you don’t at least have a plan.
Your retirement plan can be as modest or as grandiose as you like, provided that you lay the foundations to make it happen. Foresight and planning make all the difference. Your ambition may simply extend to paying off your mortgage and enjoying spending your pension on the simple pleasures like good food and fine wine. It may mean moving to a picturesque ranch somewhere like Colorado or Northern California, read more here about ranch properties. It may simply mean leaving a decent legacy for your kids to remember you by. It’s fine if the plan changes, but the more specific you are now, the easier it will be to work towards your goal and measure your progress.
Supplement your 401k in a tax friendly way
As the world’s economies wrestle with the logistics of how to support an aging population, bodies like the IRS look upon any efforts made by individuals to save for their futures favorably. This means that alongside any efforts you make to save alongside the 401k provided by your employer comes with some impressive tax benefits. Why give your money to the IRS when you can invest it in your own future, right? While you should contribute the maximum that you can logistically afford into your 401k, you should also add a tax friendly IRA (Individual Retirement Account) to your retirement savings plan. You can contribute up to $5,500 per annum to this with a catch up allowance of $1000 a year for savers over 50. If you haven’t yet opened an IRA you can learn everything you need to know about opening one right here.
Take a good long look at your savings account
On top of your 401k and IRA the gold standard for savers is to also have an individual savings account for all your non-retirement related expenses. This is to help you navigate all those little hurdles that life will throw in your way in an effort to destabilize your finances and prevent you from living your dream. While it may not directly affect our retirement savings, it can act as a useful buffer in the case of unexpected home or car repairs or medical bills so that we don’t have to dip into our retirement savings or take payment gaps from it.
While most of us have a savings account (even if we don’t pay into it regularly) few of us are really making the money we save work for us. Most high street savings accounts have fairly anaemic interest rates hovering between 0.01% and 0.06% APY. That’s not going to buy you a retirement cottage! Look instead to online savings accounts. Because online banks have fewer overheads they can pass their savings onto you in terms of higher interest rates. Check out this guide to the best online savings accounts of 2018.
As important as saving is when it comes to preparing for your dream retirement, it can also be supplemented with a diverse investment portfolio. While any investment brings with it a degree of risk, the monthly dividends provide you with a nice little boost to add to your income and if you invest some time into learning the market or working with a stockbroker to buy and sell commodities strategically you can really grow your money.
Some are wary of investment, considering it akin to gambling and while there is an unpredictable element to investing, it has a far greater ability to grow your money in the short term than savings. There are many commodities which you can use to build your portfolio from real estate to stocks to foreign exchange to cryptocurrency. Start out small and keep your portfolio as diverse as possible and you’ll insulate yourself from the lion’s share of the risk while still enjoying the benefits.
Ask yourself “is this part of the plan?” when it comes to big spending
Aside from unexpected medical costs and home or car repairs, the biggest thing that can derail your financial security is reckless spending. This is where having a plan becomes particularly important. In a consumer capitalist society we face temptation from unnecessary but oh-so-pretty-and-shiny consumer products on a regular basis. When it comes to big spending, it’s important to ask yourself “is this part of the plan?”. If it is, consider it an investment in your future. If it’s not, walk away and ruminate on how badly you really want it.
It’s never too late, and it’s never too early to think about your dream retirement. Just bear the above in mind when setting out the building blocks for your future.