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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?
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We are just now aggressively saving for retirement. Before we were slowly chugging along, but nothing to be excited about. I think being motivated is a big factor. Retirement can be a long ways away, so being motivated can keep your eye on the goal.
Yes, the same way, you can’t simply work everyday for promotion. Unless there are small rewards and recognition, you’ll feel the going un-inspirational. Perhaps we need to handle our lives like a corporate house. We need to give ourselves rewards, in terms of occasional vacation, costly electronics, etc. Just my thoughts.
While I agree that it’s extremely important to save for your retirement I would take issue with the idea that retirement is “to enjoy things we postpone during our working life”. I would argue that when you are retired (certainly if you’re in your 60s) you no longer have the same energy or the drive to do the things you wanted to when you were younger: sky-diving and bungy-jumping may sound like fun now, but will you still want to throw yourself out of a plane or off a bridge when you’re sixty?
I am not saying “don’t save for retirement” of course: what I am suggesting is bringing retirement forward instead of pushing your dreams further and further down the line. Life shouldn’t start when you reach pensionable age.
I know where you are coming from. But enjoying life is not only physical activities alone. Even a day at museum, looking at exhibits, is a dream for many. I’d like to spend an entire fall on a hill watching leaves changing colors everyday. Is it possible now? No it’s not.
It’s funny reading these comments. Money says when you are 60 you don’t have the same energy for things. how would you know Money. I did all those things in my younger years , bungy jump , hang glide , sky dive , travel over the world etc. now as I’m 59 I feel as good as I did at 29 . I have kept my health and exercised and life continues to be good. The difference in me and most of my peers is that 30 years ago I was debt free and have been since that time. I saved and managed my money and it has made the greatest difference. I never made more than 50 k but have over 1m in savings. You have to see the Forrest through the trees . I have friends who are at the mid 60 age and are several 100s in debt with house , auto etc because they kept thinking they needed to keep up .
I’m chugging along on my retirement savings, though definitely not in any sort of aggressive fashion. Luckily my company automatically puts 15% of our earnings into a retirement account so between that and maxing out my Roth contributions I already have around half a year’s salary sitting in Vanguard after 2 years of working. Most of my money I’m setting aside for more immediate financial goals though, like buying a house.
You mean you get 15% straight in to your retirement account, and not through match? That’s very interesting. Also saving half years salary out of two years is really commendable. Good work!
I wish I would have started to save a lot earlier when I was working in high school.
In that case, it’s plan B that should be applied. increasing your contribution with some side gigs, if possible