How to Avoid Working in Old Age and Meet your Retirement Goal

This is not an astrological prediction, but, a possibility for most of us. 20% of workers aged 50+ are in the workforce; 75% of workers aged 50+ are expected to have retirement jobs in the future. So most of us will still be working for a job to meet our basic needs for food and shelter. This is a scary situation. Retirement is a time to cherish the hard work of yesteryear. Retirement is to enjoy things we postpone during our working life.

The best thing you could do now is to realize that you are falling behind and try to correct your situation. Unless you really enjoy your work and enjoy being in a company of colleagues, you must look out for a safe and comfortable future, where your money could bring in the returns that let you enjoy the same or a better lifestyle than what you have today.

The answer is not straightforward, it involves a series of steps that you should take today.

How to avoid working in your retirement?

Most of my friends and colleagues don’t want to continue working after they reach their 60s. They want a nice beachfront home, and they want to relax and enjoy the rest of their life.

First and foremost, you’ll need to start early into your retirement saving. But if you are already in your late 30s or in 40s, you can still achieve your retirement target.

Keep in mind the following tips:

1. Set a goal then start saving and start contributing to your retirement savings account to meet the goal – This is the most important step towards meeting your retirement goal.

A better approach would be to increase your earning potential or adding an additional income stream from a side hustle. But, this may not be feasible for a majority of people. So, saving money for your retirement account is utmost important.

And the best way to save money is by budgeting your spending. Learn to budget, you only need a pen and a paper to budget. You can do it online using a spreadsheet. Track your finances for a couple of months then study your spending and budgets accordingly.

Unless you budget your finances, you’ll probably not realize how easy it is to save money from your current income streams. Make each and every family member a part of budgeting; gather their input and have them align with your budgeted spend for the month.

One of the most important inputs for your budget would be the target amount in your retirement account by the time you retire. Get help from one of the free  online retirement savings calculators. It’ll tell you how much you need to save per month to meet your target.

2. Open a retirement saving account – I have my employer provide a 401(k) and an IRA account where I save regularly for retirement. This retirement saving accounts have tax advantages and they make withdrawing money difficult before retirement, that’s exactly what you need.

3. Get full advantage of employer match – Companies offer a matching contribution to your retirement account when you contribute. This is free money for you. This is the first thing you should check with your employer today. I do get a company match up to 5% of my gross income. The caveat is I should also contribute 5% of my salary. My previous company offered 1.5% of my gross salary.

If you’re not availing your company’s match contribution, you should take advantage of it right now!

4. Start investing your money wisely – Saving alone will not get you where you want to be. From using the retirement saving calculator, the more the rate of return on your investment, the more savings you’ll have by the time you retire. A mere 1% extra makes a huge difference.

Invest smartly in assets that appreciate more than a basic CD or a savings account. Have exposure to the stock market and other derivative products.

5. Get some professional help at a bargain price or free –  New financial advice companies have arisen in the wake of the 2008 stock market crash.  These companies use algorithms to analyze your current investments, risk tolerance, and time horizon to recommend an optimal portfolio for your situation.  They charge a fraction of what traditional advisors charge, and some of them offer their advice for free.

Personal Capital is one of these financial institutions. They provide free recommendations on how to optimize your investment portfolio and updates their advice as the market shifts. If you don’t want to manage/re-balance your portfolio every time the market changes, you can hire them to do it for you for a mere 0.5% of your portfolio value.

Recently I came across this service from one of my colleagues. I truly appreciate their transparency and clear-cut approach.

6. Do not withdraw from your retirement saving – Unless it’s absolutely needed in a life or death situation, I’d advise to not withdraw any money from retirement accounts. Not only does it set you behind your target, you’ll need to pay a penalty in taxes as well. If borrowing money at a cheaper rate falls through, it’s a wise move to draw from your retirement saving but try to avoid the need for borrowing a large sum.

7. Budget and put the excess into your retirement saving account – Always budget your spending, preferably every month. This ensures you are on track for your retirement savings goal. If you find some unspent money at the end of the month, do not hesitate to invest it into your retirement saving account. An extra $100 extra per month in your retirement saving could bring an extra $300 per month during your retirement.

8. Stay motivated – Often saving for the future without spending money now on your wishes is emotionally draining. Not buying a big screen TV to save for retirement is not a good idea for many. But just imagine today’s $600 towards the TV can become $10,000 over the years and think what else that can buy you. Stay motivated by splurging a bit here and there. This is a journey and a lot of kickbacks will be needed from time to time.

Reader, is your retirement saving on track as of now? If not are you planning to work in your retirement or will you catch up before you retire?