Experts would have you believe that you will require millions of dollars to retire in comfort, but more than half of the baby boom generation possesses less than $25,000 in retirement accounts. This paltry amount is hardly enough to provide for one of year of living at today’s poverty line. Intimidated by the large number, most boomers never even started saving for retirement. Generation X and the Millenial generation now wonder if they will ever be able to retire.
Yesteryear offered two retirement strategies: earn a pension, or work until you died. In the 1970’s, legislation created the 401k account, today’s most popular retirement savings vehicle. The economic turmoil of recent years shook the faith of stock market investors, and people question if the theoretical returns proposed by financial advisers can be achieved by the average American. Implement these easy retirement savings strategies to retire comfortably without engaging in risky or complicated investments.
Start Saving, and Don’t Touch It
Your first goal is to establish the nest egg. Several financial gurus espouse the automatic savings doctrine including David Bach, the author of the Automatic Millionaire. Setting up automatic payments into a savings account, no matter how small can jumpstart your retirement savings.
Select a savings account that cannot be readily accessed from an ATM. An account with an online bank could be an excellent choice and may offer high-yield rates. Transfers to external bank accounts take a few days which helps kill the temptation to cannibalize your savings for impulse purchases.
Invest for Income
Once a small nest egg begins to grow, monthly savings can be supplemented by income from interest and dividend investment opportunities. Try buying shares of dividend bearing stocks and set up a dividend reinvestment plan, commonly called DRIP. Create a ladder of certificates of deposit to obtain the top interest rates while maturing at least 1 CD annually. A balance of $100,000, at least four times the average, can easily produce annual income of $5,000 through conservative investment choices. The key to success in this retirement strategy is not the specific investment choices, but understanding how to make appropriate investment choices to produce income from retirement savings.
Minimize Expenses
Housing costs use up a substantial amount of retirement income each month. Plan now to reduce the cost of keeping a roof over your head. If you own a home, pay off the mortgage before you retire. Think that renting is the way to go? Find a rental that can be comfortably shared with roommates in a low cost of living area.
When retirement approaches, everyone dreams of the time they will have to pursue their favorite hobbies. Could your interest be combined with a seasonal or part-time job that permits indulgence at a discount? Ski instructors, golf caddies, and diving guides are a few examples where the hobby returns an income.
Set Financial Priorities
A clear picture of your life in retirement can help align current habits with future goals. Take time to visualize your retirement lifestyle and estimate the cost of items in today’s dollars. The price of the lifestyle you select defines the building blocks of your retirement savings plan. The big picture may be overwhelming at this stage, but the breakdown of your ultimate goal allows you to mark milestones as you amass your retirement savings.
