The approaching holiday season reminds us that this year is ending, and another is about to begin. The past eight years have been challenging, with the Recession trouncing many families and businesses, and a sluggish recovery that is still hampering the return to full function of many industries. If retirement is in your plan for 2016, or even 2026, hopefully, the past economic doldrums have taught you that disciplined financial planning is necessary in order for you to withstand negative financial forces over which you have no control.
The following tips provide some direction as you contemplate your 2016 financial planning activities. Some of them are more relevant to those whose retirement is sooner rather than later. All of them are educational for anyone who plans to enjoy a happy and secure retirement, whenever it might begin:
For those over 60:
1. Review Your Workplace Retirement Benefits:
Although the Recession may have eroded some of these opportunities, many employers continue to offer valuable financial benefits even after retirement begins. The value of free health insurance to a retiree is immense, especially if retirement begins before Medicare eligibility. Employer contributions to the 401(k) might also be available. If you’re still years away from retiring, plan to check in on a regular basis with the HR department to stay on top of possible positive developments.
2. Review Your Long Term Investment Plan:
If you don’t have one of these, now’s the time to start one – it is truly never too late to launch an investment plan. Depending on when you intend to retire, your portfolio should contain the assets that are most likely to provide you with the income you’ll need throughout your retirement. Some people plan never to retire, and expect to earn a steady income throughout their later years. Others are looking for 20 or more years of golf and beach combing. They will need a different strategy to ensure adequate cash flow regardless of what the economy is doing.
3. Develop an Emergency Financial Plan:
An emergency financial plan is not the same as planning to move in with your adult child. The availability of liquid cash can avert many disasters, so having access to six months to a year’s worth of monthly expense funds can keep you afloat in trying times. Keeping the funds in an interest-bearing account, no matter how puny the interest rate may be, provides a vehicle to which to turn if the need arises.
For those Under 50:
1. Embrace the Gift of Compound Interest:
According to Albert Einstein, compound interest is “the most powerful force in the universe”. Early investment (and reinvestment of investment returns) can have a profound effect on the growth of any financial fund. Many banks and financial institutions will set up savings/reinvestment accounts that draw a regular installment from your income, and then reinvest the dividend the fund pays out. Because the transactions are automatic, you do not experience the “loss” of the funds, and the net growth can provide a sizable nest egg with almost no effort on your part.
2. Consider Your Savings as an Investment in Yourself:
Foregoing even one night out a month in favor of saving the funds can lead to significant financial growth with very little social loss. Just as you budget for your work wardrobe or vacation, you should also budget for your later years. Beginning in January, contemplate the value of comfort in the long run over a night of so-so pizza with friends, and put those funds away appropriately.
3. Plan to Enjoy Each Day, No Matter What:
Setting up, and following through with, a sound financial plan can be the foundation for a happy and fulfilled life. Knowing that you’ve got that basic requirement covered frees you up to focus on the other aspects of life that bring you joy. And continued financial discipline over time will assure that you will have the resources you’ll need when retirement day finally arrives.
Spending money and saving money can accomplish the same goal – the creation of an asset that brings value now and throughout its lifetime. Schedule a chat to discuss how I can assist you to establish a successful financial plan for your retirement.