Although retirement planning involves decisions that affect your future, it is an activity that forms a part of your present financial plans. People generally perceive retirement one-dimensionally and plan for a comfortable future by simply cutting down on their expenses and living frugally. While frugal living is an effective way to save for retirement, it is not the only way to safeguard your future.
There are many other strategies and investment options to save for your retirement without compromising on your present goals and altering your preferred lifestyle. With some careful consideration you can relish the present and plan for the future at the same time. Here’s how:
Assess your situation
The first thing to do when you begin retirement planning is to assess your situation correctly. Start with your present way of living, the routine you follow, your spending habits, income resources, savings goals, wants and needs like a home, car, real estate, etc. A careful assessment of these factors will bring clarity to your mind and help you devise a fruitful plan for the future.
The next step is to have a look at your finances. Take a cumulative look at all your savings, investments, and income. This should include your salary, the money at the bank, emergency funds, investments like stocks or bonds, and retirement savings accounts. Make sure that your savings and investments are able to account for your goals and needs. If the two do not complement each other, you may have to change the course of your financial plans.
Check with your goals and make new ones if required
While you go through your finances, you will realize that most of your investments are influenced by the goals that you set for yourself. Financial goals are a part of life goals but can be slightly different in terms of strategizing. Depending on the concerned situation, you might have taken an investment decision that may not sit well with the rest of your portfolio. For example, you may be compelled to invest in a friend’s business or a family venture, even though these plans may not directly benefit you. Hence, it is important to review your portfolio and check if your investments are in line with your goals.
Also, there may be a third category to your goals, retirement goals. Your retirement goals could be anything right from wanting to travel the world, to living in the countryside, or building a school for the underprivileged. Whatever goals you set, you need to find the financial means to achieve them. You should also aim for realistic goals. If you feel that your goals are unrealistic, you may have to revise your plans accordingly.
Some people also make the mistake of not setting any goals at all. While this approach may work for some people, others may find themselves caught off guard with poor financial planning, unable to meet the many uncertainties of life.
Strategize for a mutual co-existence plan
Mutual co-existence is a crucial aspect in your lifestyle and retirement goals. There is a thin line between the two and even a slight mismanagement can severely alter your future finances. When it comes to building a plan that lets your lifestyle goals and retirement goals
co-exist, you need to be extra careful to not stretch limits from one side and suppress the other.
It is important to strike the right balance between the two. Living a frugal life in the present may offer you a comfortable retirement, but you may also end up living the better part of your young years struggling to make ends meet. On the other hand, living a flamboyant and lavish life now can result in a difficult and restrictive retirement. In the race of making your present worthwhile, you must not look down upon your retirement or vice versa.
Review your final plan
The last thing to do is to review the adjustments you have made. Right after putting your plan in action, try to review your portfolio and see if any of the changes that have been made are undesirable or unmanageable. If you feel the need, you can make alterations again and re-launch your strategy into action.
You can also set a frequency to review your portfolio. It can be a 3-month, 6-month, or yearly review, but make sure you do it in regular intervals to keep yourself abreast with the market and economy fluctuations. It is also important to review your goals and requirements every now and then, as these are likely to change with age. Given the uncertainty of life, newer situations and needs may arise demanding a completely different financial plan when you least expect it.
With growing age, another crucial thing that needs to be factored in is health. Despite leading a healthy lifestyle, health emergencies can come in uninvited, robbing you off your savings. Investing in the right insurance policies can be an effective way to secure your present and future.
To sum it up
Retirement planning is an extensive task that accounts for almost half of your life. With the fast-spreading FIRE (Financial Independence, Retire Early) movement, the retirement age seems to lessen by the day. People have started working extensively during their early years and plan to retire by the age of 40 or 45. Early retirement calls for some strict routine changes and demands high goals. But, in the hunt for a secure retirement, jeopardizing your present may turn out to be a challenging approach for some. So, make sure you understand the pros and cons of your plans before you set things in motion.