Retirement can be one of the most exciting—and daunting—transitions you experience. You’ve put in your time at the daily grind, hit the peak of your career, and begun to wind down. Hobbies, projects, vacations, and family connections that you’ve set aside in the last few decades begin to beckon. But it isn’t all iced tea and white sand beaches.
Once you stop working, you’ll be responsible for supplying your own income for the next 20, 30, or even 40 years, and paying for your own healthcare, long-term care, and emergencies along the way. No wonder 49% of Americans feel anxious about paying for retirement.
Don’t let yourself become a statistic. Use these 6 tips to get ready for a financially-secure retirement.
1. Know how much you have saved
Being retirement ready is more than an age or a feeling. It’s having enough savings to support yourself after you finish working. How much you need to retire depends on your personal goals, lifestyle, and needs. This calculator from Kiplinger can give you a ball-park figure for what you should have saved.
But be careful: unlike an accredited financial advisor, retirement calculators and planning guides fail to take into account the specifics of your situation. For example, if you plan to retire at 62 and suffer from a chronic illness like diabetes, you will need to save significantly more than a healthy person in order to cover the cost of medication and treatment.
2. Cut fixed expenses
One way to avoid outliving your retirement savings is to downsize regular expenses like subscriptions, bills, and memberships. Take a close look at your cable bill, car insurance, and any memberships you might hold to make sure you’re really getting the best deal. After all, there’s no reason to pay for 1,000 channels when you only watch 5 on a regular basis. Apps like Trim and Clarity Money can even negotiate on your behalf and apply discounts, coupons, and rebates to your monthly bills.
3. Create an allocation account for your bucket list
Life is a bucket, and we’re all going to kick it someday. Make sure you have the funds to make the most of it by creating a separate savings account for big-ticket items like family weddings, dream vacations, and bungee jumping. By keeping your “bucket list” funds in a separate account, you’re less likely to overspend from your retirement accounts.
4. Hunt down hidden investment fees
Investing can be surprisingly expensive. The management fees on mutual funds and ETF’s might look small (0.5-2.5% on average), but over time they can take a chunk out of your profits. It’s the law of compound interest in action—every cent that leaves your account to pay for fees is a cent that isn’t earning a return on the market. Make sure investment earnings are going into your pockets—not your broker’s. For a full list of common hidden fees and how to avoid them, check out Nerdwallet.com.
5. Check your risk
You know that as you get older, your risk tolerance goes down. Your portfolio needs to be adjusted accordingly. Look at your investments in all market conditions to ensure you’re not carrying more risk than you can handle. Cowen Tax Advisory Group offers a free in-person portfolio analysis to make sure your investments can weather a recession without leaving you and your retirement shipwrecked.
6. Plan with a professional
When it comes to retirement, one size does not fit all. Plan for retirement with a fiduciary financial advisor who will put your interests front and center. Why? Financial advisors handle the time-consuming work of investment research and asset allocation. They also have the know-how to build a comprehensive strategy that allows your investments to work with your taxes, insurance, and estate planning in order to meet your financial goals.
However, buyer beware: not all financial advisors have your best interests at heart. It may come as a shock, but there is no law that requires your garden-variety advisor to put their client’s interests before personal gain. Most advisors only have to suggest products and investments that are “suitable” for their clients. That means they can recommend a high-fee life insurance policy even if you don’t specifically need one.
Only financial advisors who are fiduciaries are required by law to put you before their own bank accounts. If you don’t require a product or a service, they won’t try to sell it to you, and if you don’t need a financial advisor after all, they’ll be the first to tell you.
Sara McKinney
saractag@gmail.com
As Cowen Tax Advisory Group’s Digital Content Marketing Specialist, Sara provides in-house copywriting and manages the company’s electronic records system, email marketing, and blog.
