Making sure you can keep the lifestyle you’ve grown accustomed to in your working years is a concern for many when it comes to preparing for retirement. There are several factors to consider, so where should you start? First and foremost, you can take advantage of your employer-sponsored savings plan if one is offered or fund your own IRA. With your future cost of living unknown, it’s a good idea to save as much as possible, starting now, with the goal of building a nest egg that allows you to maintain a comfortable lifestyle when your working years are done.
Work harder—or smarter. Extra income is always a welcome addition when you want to increase your retirement account. If you happen to get a raise or a large bonus, allocate a portion of the increase to your retirement account. If there’s no such opportunity with your current job, think about adding a gig. Consider a part-time job or consulting work, which are great ways to boost your disposable income and increase your ability to save.
Make small sacrifices. They really do add up. Examine where your spending has gotten out of hand and reel it in. Every “extra” you forgo now leaves more in the bank that can then be put into savings for your future. Your morning latte is a treat you may regret indulging in down the road. By the time you factor in a tip, you’re spending $5 per day that could be invested instead. Newspaper and magazine subscriptions are another example of luxuries you may be able to cut back on or live without. The point is pennies saved here and there snowball over time.
Be smart about debt. Debts that accrue interest can take a bite out of your ability to save. Delay purchases until you can afford them without taking on new debt. If you absolutely must take out a loan, repay it as quickly as you can. Utilize credit cards to earn cash or travel rewards, but avoid carrying a balance. With the growing acceptance of debit cards, you may be able to skip having a traditional credit card or just reserve the ones you have for emergencies.
Help yourself first. Your ability to help family members or support your favorite philanthropic organization will be much stronger if you keep your own financial needs front and center. Therefore, avoid straying from your plan and dipping into your retirement dollars to lend financial assistance.
Consult with the experts. Another important but sometimes overlooked way to increase your savings is to utilize a balance of investment products designed to enhance return potential. Rather than try your hand at picking hot stocks or timing the market, look to a qualified financial professional for expert advice. A financial advisor can recommend appropriate investment vehicles for your goals and needs while also helping you work within the context of a personal financial plan. Together, you can periodically review asset allocation and adjust your investments to meet your needs.
William “Drew” Watson CFP® is a Financial Advisor and Private Wealth Advisor with Ameriprise Financial Services, Inc. in Owensboro, KY. He specializes in fee-based financial planning and asset management strategies and has been in practice for 20 years. To contact us by phone, please call 270-684-8424, or by mail at 111 West 3rd St., Owensboro, KY 42303. You may also visit our website at www.williamawatson.com.