Whether you’re just starting your journey to retirement planning or you’re trying to catch up late – this can feel like a complex, daunting process. But it doesn’t have to be. We’re going to simplify things for you today as we discuss the only financial advice for retirement planning you need.
The fact of the matter is that retirement planning has become way overcomplicated. The principles behind how you should go about setting yourself up for a comfortable, lucrative future are quite simple – and haven’t changed much over time.
Start early, undertake careful planning, strategically select your investments, and manage them over time – that’s all that is standing between you and your dream retirement.
We’ll take a deeper look at some of the most important financial advice for retirement planning in this article. And because time is of the essence, we’re going to get right into the discussion at hand.
Financial Advice for Retirement Planning to Help You Make Your Dream Lifestyle a Reality
Here at VectorVest, we’re on a mission to empower you along your journey to financial freedom – whether you want to generate supplemental income in the here and now through swing trading strategies or prepare for your future through smart, strategic retirement planning.
Our software helps even complete beginners effortlessly get started investing. We tell you what to buy, when to buy it, and when to sell it. This will prove invaluable as you manage your retirement portfolio over time – and you may just find that it changes your life in the here and now, too.
We’ll talk more about the software later on – first, let’s begin with the most important piece of advice we have to offer when it comes to retirement planning: start as early as you possibly can.
Start as Early as Possible – Time is on Your Side!
If you only took one piece of financial advice for retirement planning from this article, let it be this: start as early as possible. This sort of goes without saying – obviously the earlier you start, the more time you have to make those contributions to your retirement plan stack up.
But as we discussed in our complete guide on the advantage of investing early for retirement, the compounding effects of time are far more powerful than most people realize. This is something that is best illustrated with an example.
So – say you’re fresh out of school and just scored your first real job at the age of 25. You take all the money from your graduation gifts along with other cash you have saved up and make your first contribution to the retirement plan you set up at your company. Let’s say you decide to invest $6,000. Assuming no other contributions, that $6,000 will turn into almost $250,000 by the time you’re 62 at the last 30 years average rate of return.
By letting your returns accumulate and continue to compound year over year, you let your money work for you – and you end up spending far less to reach your retirement goals than if you start later. For example, a 35-year-old with no existing retirement account would need to contribute almost 3 times as much to reach the same figure by age 62 – $16,250. You’re spending an additional $10k to catch up.
Just imagine what’s possible with monthly contributions from you – and your employer’s matches – when you start at a young age! To really drive this point home we want to offer another example of what having time on your side can do. Let’s say you work a summer job at the age of 16 and save up that same $6,000. Rather than spending it on fun, you invest in your future and put it into a long-term savings account – you’ll have saved nearly $600,000 by age 62!
It’s simple. If you want to retire early, start early. And a great starting point is sitting down and envisioning what your dream retirement lifestyle looks like – and what it will cost you.
Envision Your Dream Retirement Lifestyle and Estimate How Much it Costs
To really put a sound plan in place, you need to know what you’re saving for. Retirement looks different for everyone – and thus, retirement costs are different for everyone.
Take stock of your goals. Do you want to travel the world? Are you looking to move closer to family? Do you plan on setting up a business or starting a charitable organization? All of these things will require different amounts of money. Envisioning what your retirement lifestyle looks like is also important in terms of figuring out how much risk you’re willing to take with your investments.
First, understand that retirement is becoming more expensive across the board. Humans are living longer, and thus, need to stretch their savings longer. If you plan on retiring at 62, you should account for at least 30 years of expenses – as the current life expectancy is continuing to rise.
In terms of determining the cost of your retirement, start piecing together estimations for your cost of living. For many, this number falls between 50-80% of your current income annually. So – if you make $100k a year right now, your annual cost of living in retirement will cost you anywhere from $50k-80k a year. So – a 30-year retirement can cost anywhere from $1,500,000-$2,400,00 – that’s obviously a lot of money.
Don’t forget that social security benefits will help you with some of this. And if you have a pension plan throughout your career, you’ll have an even lower actual cost of living. Nevertheless, it’s good to shoot for a higher retirement savings goal and have more money than necessary.
Knowing all this, you can start to work backward and do some math on what you need to contribute to your retirement savings account monthly to make this vision a reality. And of course, you’ll need to choose a retirement plan that makes the most sense for you.
Choose the Right Retirement Investment Account
When it comes to retirement accounts, there are a few different options you can choose from. From IRAs (Individual Retirement Accounts) to 401(k)s and beyond – think about your goals and what you’re trying to achieve with your retirement planning.
If you’re looking for more flexibility – meaning the ability to pull money out early if needed – consider opening an IRA or Roth IRA. With either of these accounts, taxes won’t be taken out until you withdraw the funds in retirement. A 401(k), on the other hand, is offered through employers and you don’t have access to that money without penalty until you reach 59 1/2 years of age.
We recently wrote a complete guide covering the different types of retirement accounts – detailing the tax advantages, contributions limits, and other pertinent information to help you make the right decision. No matter which option you choose, it’s important to understand the ins and outs of each account, as well as your specific retirement goals.
Manage Your Portfolio Over Time, Adjusting As Necessary (But Don’t Withdraw!)
Once you have everything in place and have chosen a retirement plan that fits your needs – it’s time to start investing! You may make adjustments to your contributions over time as life happens – either forcing you to cut back on retirement planning or offering the ability to invest more when times are good.
What you don’t want to do is make withdrawals. Obviously, if there’s an emergency and no other option, you may not have a choice. Just know that early withdrawals are penalized heavily – and can set you way back in your retirement planning.
You may also make adjustments to your investments themselves. This can be done to assist with hedging against inflation or to create a recession-proof portfolio. Or – maybe your goals change over time. While you initially started with more risky investments, you now want to focus on capital preservation. On the other hand, maybe you want to live a more lavish retirement lifestyle – and you’re willing to allocate your capital differently to make it happen. Learn more in our deep dive on the best asset allocation in retirement.
With that said, certain accounts don’t offer much versatility in terms of where you can actually invest your money within the account – but some do. And that’s something you should take advantage of if possible. Going beyond the basic retirement investment accounts allows you to earn higher returns and get to retirement faster and cheaper. We’ll talk about that next…
Go Beyond the Basic Retirement Plans
Traditional 401ks and solo 401ks have a time and place – but they are among some of the more limiting types of retirement accounts. Certain IRAs, though, give you the ability to invest beyond simple mutual funds. You can invest directly in individual stocks to maximize profit and seek greater portfolio performance.
If you want to increase your contributions, you can even learn swing trading or consider day trading stocks to earn supplemental income in the here and now. You can explore all the different types of investments for retirement in our complete guide – it’s a great resource for picking your investments to perfection.
It’s actually much easier than you think to start small account trading – and over the course of time, the results can be incredible. You just need to empower yourself with tools & resources for success – even if you don’t go beyond the basic retirement plans. With that said, here’s the final – and perhaps most important – piece of financial advice for retirement planning you need to hear.
Empower Yourself With Tools & Resources for Success
Investing doesn’t have to be a complicated process. In fact, even someone with no understanding of how the stock market works can invest at a high rate of success. And if you’re wondering if a financial advisor is worth it, the answer is no – at least, not usually.
You will end up paying them exorbitant fees and really not getting much value out of them. That’s because everything they’ll do for you can be done on your own with pretty minimal effort.
You just need to invest in yourself first – empowering yourself with educational resources and tools that make your efforts easier & more fruitful. Thus – we encourage you to read a few important articles we’ve written on this topic.
We have a complete guide on personal retirement planning (as we mentioned earlier, you don’t need a financial advisor for this journey!) to help you get started. You can also learn the best way to invest money for retirement, or explore retirement investment strategies by age. We have great articles on how to invest during retirement and generating retirement income for when the time comes as well.
But – If you want to increase profitability and get to retirement faster and cheaper – while minimizing risk – consider using VectorVest – the #1 stock analyzing software. VectorVest helps you trade stocks or funds within your retirement account with ease so that you can achieve maximum returns in the minimum time.
It tells you what to buy, when to buy it, and when to sell it – so that all you need is 15 minutes per day or less! Our proprietary stock screeners can help you find the safest stocks for retirement, or the top dividend-paying stocks if you want to retire on dividends.
Plus, you can see the overall market conditions at a glance – helping you protect your portfolio in uncertain times and capitalize during favorable conditions. You can even take your investments on the go through our mobile stock advisory app. See it in action yourself with our free stock analyzer today.
Wrapping Up Our Financial Advice for Retirement Planning
That concludes our discussion on financial advice for retirement planning. We hope this article gives you the confidence necessary to get started.
You’re just a few clicks away from taking your financial future into your own hands and embarking on a stress-free journey to a lucrative retirement.
So what are you waiting for? Get started today.