Whether you’re in your 30s, 40s or 50s, it’s never too early to start planning for retirement. That being said, the financial status and concerns of someone in their 30s would typically be quite different from that of someone who’s middle-aged or older.
Retirement planning is a multi-step process and requires you to prioritise certain goals over others depending on your life stage. But whatever age you’re at right now, make sure you don’t omit the following top three items when it comes to retirement planning advice.
1. Base your retirement strategy on your time horizon.
The foundation of a successful retirement strategy is your current and expected retirement age. The younger you are, the higher your risk tolerance as you still have several years to go until retirement. So if you’re still in your 20s or 30s, you can put the majority of your assets in riskier investments that promise better returns, such as equities. You also need to ensure the growth of your investments and savings can outpace inflation if you want to maintain a particular lifestyle during retirement.
Conversely, your primary concern would be income and capital preservation when you’re older. This entails placing a larger portion of your portfolio in safer investments, such as bonds, which may not provide the same returns as high-risk investments. However, bonds are less volatile and can help ensure adequate income during retirement.
2. Pay off as much debt as you can.
A lot of people in their 60s and 70s still have mortgages, credit card debt, and other loans to pay off. When this happens, the idyllic retirement lifestyle you’ve envisioned will vanish into thin air.
Therefore, the ideal time to pay off debt is now. Eliminate your credit card debt, motor vehicle loans and mortgage as early as possible, whether you intend to retire within the next five years or in the distant future.
3. Invest in your health.
While wealth generation is an essential aspect of retirement planning, maintaining one’s health is even more important. Therefore, the best retirement strategy also includes meeting your physical and emotional needs.
Ensure you stay physically fit by eating healthily and making exercise a part of your everyday. Set goals, plan projects, engage in enjoyable pursuits and find meaning in life to stay motivated and mentally stimulated. And don’t forget to consider funding for healthcare expenses.
Biggest retirement planning mistakes
The importance of retirement planning cannot be underscored enough. And a crucial aspect of this entails avoiding these retirement planning mistakes as well:
- Delaying saving and debt repayments.
- Investing in get-rich-quick schemes (e.g. Ponzi and pyramid scams).
- Cashing out part of your retirement fund too early.
- Relying solely on social security benefits.
- Forgetting to consider inflation.
- Not budgeting for medical costs.
Retirement is a reality everyone has to face.
If these tips catch you off-guard, don’t give up because it’s never too late to start planning for retirement today.
If this article has inspired you to think about your own unique situation and, more importantly, what you and your family are going through right now, please contact your advice professional.