The German government has recently started to talk about increasing the retirement age to 69 years old (Forbes). This may seem high, but people increasingly have to retire later, whether they’re in Europe, America or even Australia. A rise in the cost of living and poor investment returns have resulted in many people working well into their 60s (and even 70s). Unfortunately, their retirement nest egg isn’t as big as they anticipated it to be. It doesn’t matter what age you are, skillful financial planning and investment is essential for a comfortable retirement. Here are some tips to help you along the way.
What you can do now
Obviously, the sooner you save for retirement the better. Whatever age you are, you should be realistic about your retirement savings. According to Money.CNN.com, you’ll need 70% of your annual pre-retirement income to live comfortably. This is the minimum, as it doesn’t take outstanding mortgages or debt into account. In order to put away some money each month towards your retirement, you should cut down your expenses as much as possible, especially when it comes to credit cards. You should also shop around for the best banking fee rates and insurance premiums. In order to grow your savings, you’ll need to invest them wisely. Get the advice of a financial planner, and go for a 70/30 stocks to bonds ratio (Money.CNN.com). You can also work part-time and take out a reverse mortgage (Money.CNN.com).
What 18 – 24 year olds can do
According to Forbes, it’s never too early to start thinking about retirement! Young people should keep tabs on their credit, as a bad record will affect interest rates for loans – which will limit the ability to save. Forbes advises that retirement savings should be treated like any other expense: they should be budgeted for each month, just like an insurance payment or the electricty bill. Just because you’ll only need the money at a later date, doesn’t make it any less important. In order to save extra each month, some discipline and lifestyle compromise will be needed. Forbes suggests that young people delay moving out on their own for at least two years after starting work, and if they do move out, they should share the cost of rent with housemates. The sacrifice of independence will be worth it in the long run.
What you shouldn’t do
According to US finance guru Suze Orman, you shouldn’t retire! Most people will have to work until they are 67, or even 70 years old. – and that’s just to get by! Many people think that they can get extra retirement funds by selling their home equity, but most owe more money on their home than it’s worth. An increase in the cost of living, poor economy and poor investment returns all have a negative effect. Whatever you do, Orman has two pieces of advice: make sure your mortgage debt is fully paid off before you retire, and try to delay retirement for as long as possible!
Unfortunately, most people will not be able to retire at 60 years old. The sooner you start planning for retirement, the better and it’s never too early to start. Ideally, retirement should be delayed for as long as possible, but if you get all your ducks in a row before your work-time is up, you won’t need to worry about that. Careful financial planning, disciplined saving and strategic investment are all essential for a comfortable, stress-free retirement.
This post was written by Ang Lloyd, a freelance writer feverishly amassing a varied portfolio by writing on a just about every topic that comes her way. Ang is passionate about writing, as can be seen by her wilingness to tackle tricky subjects such as the wisdom of planning for retirement and investing in business courses in Australia.