Planning for retirement isn’t what it used to be. The good news? We’re living longer. The not-so-good news? Inflation is at historic levels, and healthcare costs continue to increase. What does that mean? You need to save more for retirement than your parents did. Follow these five tips to help make your future a good news story.

1. Save as much as you can

Saving for your future means you also have to save for today.

Saving for today means setting aside money in an emergency savings account so that if the unexpected happens, you don’t have to take a loan, use your credit cards, or take from your retirement savings.

Saving for your future means setting aside enough money to cover all your living expenses in retirement. Your retirement planning can include a variety of accounts, including some that give you tax-related advantages.

When you’re putting together your saving strategy, consider these three priorities:

  1. Emergency savings – You’ll want to save up to three to six months’ worth of living expenses.
  2. If you have an employer-sponsored retirement plan save enough to get your employer’s match if they offer one.
  3. Try to maximize your annual contributions to your employer-sponsored retirement plans.

2. Invest for the long term

Saving for your future means you also have to save for today.

When you invest your money for a long-term goal—like retirement—you’ll want to understand five key concepts.

Risk—All investments have an element of risk. Generally, the greater the potential for growth (reward), the greater the risk.

Time—How much time you have until retirement is a key consideration in the types of investments you choose. Generally, the closer you are to retirement, the less risky your overall investments should be.

Asset classes—Retirement plans generally offer three basic types of investments, also known as asset classes: Cash is the most conservative, bonds are moderate, and stocks are the riskiest.

Mixing it up—Investing in a combination of asset classes can help you balance risk and potential reward, and the recommended mix changes over time. This is called a glide path—the risk profile of your investments should glide from more aggressive to more conservative as you near and live through retirement.

Chart about retirement

Stay the course—When you invest for the long term, stay focused on the long term. The stock market may go up and down periodically, but historically, the average return has remained positive. Try not to get spooked by short-term changes when you’re invested for the future.

3. Figure out your spending needs

Your spending needs change over time, too, which will affect how much money you’ll need to save for retirement. For example, you’ll trade work-related expenses for leisure-related expenses. So imagine what you’ll be doing and which expenses will be new, which will increase, which will continue, and which will end.

Changing expenses in retirement

Travel, leisure, entertainment Mortgage/rent Commuting
Second home Car payments Dry cleaning
Healthcare, insurance Groceries and utilities Retirement contributions

4. Identify and close the gaps

Once you’ve determined how much you’ll need to have available when you retire, take a look at your retirement accounts. Are you on track to have enough saved? If not, there are a few things you can do today to help close the gap.

  • Look at your retirement spending budget: Are there places you can cut back?
  • Can you save more today? 
  • Check the Maximum Allowable Contributions to pensions as you get older. 
  • Take a look at your investments. How are they performing? Are they still the right mix to help you reach your goals?

5. Create a plan to draw down your savings

When you reach retirement, you need to change from a saving strategy to a drawdown strategy: How will you withdraw your savings to fund your spending and last through all your retirement years?

If you have a variety of accounts—some taxable and some not taxable—experts recommend that you withdraw from a combination of account types. This may enable you to smooth out your income and keep from increasing your tax rate.  

Finally, don’t forget about Social Welfare Pension Benefits. 

Source: John Hancock.

How we help

We can help take the effort out of this for you by demonstrating how this would work for you and your family and providing you with one cohesive Holistic Lifestyle Financial Plan.

You can arrange a meeting by clicking here to access my diary, email or call 087 8144 104.