Start earlier rather than later Part 1

Planning for retirement should start earlier rather than later, but many of us put off this planning until we are in our mid 50’s.  But to have a prosperous retirement you need a plan.  Forming a program that allows you to plan for a retirement that is everything you dream it could be will challenge you to prudently consider some essential points.

Some people will write down their plan, others will talk about their plan and perhaps sketch an outline for the plan. However, surveys of retirees show that those who have written their plans down are happier than those who don't write their plan down. 

Life is full of unexpected events, and we cannot plan for all of them, but those who create plans believe that their plan will reduce uncertainty, and it gives you reasonable expectation of success. With a plan, hopefully, you will look at what your expectations about retirement are and you will be able to understand if those expectations are realistic for you or not. 

How do you start to plan, well I think like any good plan you start at the end (what results do I want) and work backwards. So the first question could be When will I die or what is my life expectancy? 

If you are going to live until you are let's say 85 you will plan differently that if you think you will live to 75. The problem is that we don't know how long we will live so we guess. Our guesses are based on family history, our health, and all other factors we can think of when we sit down to do this task. The problem is that we underestimate our life expectancy and that of our loved ones. So if we get the first question wrong, our plan is off to a bad start. So I suggest you make your best guess as to when you will die and then add 10 years to the number if don't you live that long you may not run out of money.

Women and men have different life expectancies, so the odds are if you’re married, one of you will die before the other and you need to plan for that reality because your income and expenses will change after one spouse passes away.

So you have an expiration date, so looking at your life when do you think you will want to retire and how many years do you want to spend in retirement. When do you think you will be ready? Many younger people think they are ready now, but they probably are not ready. Retirement readiness is a state of mind. Being ready means you are happy to leave your workplace, including partners, structure, the sense of purpose and the activities associated with it. 

Once you determine your ideal age for retirement, you can start the transition to retirement by over months or years, reducing working hours or increase vacation time. If life were ideal we would slowly transition into retirement, but life isn't ideal and sometimes your retirement date isn’t always in your control. When you’re more than a couple of years from retirement, your plan should include a possibility that you might retire before you intend because of health or the economy.

You have an expiration date, you have a planned date for your retirement. It is now time to think about two things, How much money will I need and how will I occupy my time.

Many of us believe that we are not putting away enough for retirement and want to find ways to save more. While some money will be needed for everyday living expenses, medical issues and hobbies to occupy your time. To help find money start by simplifying your finances. Be practical and accept that it will take time to get everything finished.

The first step is to organize information and documents about your current situation, and then research alternatives and decide on a course of action. Some simple tasks you can do during relatively short periods each week. For more involved tasks, you might need to set aside a half day or more at different times during the year.

Here are some ideas to think about as you focus on your retirement finances. One review your bank and financial accounts.

Financial firms count on your inertia. They may offer good deals to entice customers, then over time either reduce the benefits or don’t keep up with what others are offering. Schedule a meeting with your financial institution and ask if you can get better terms, and then see what others offer. For example, if your checking account is at the bank that holds your mortgage, the checking account should be free with no, or a very low, minimum balance. Or if you have most of your investment accounts at one discount broker, you should have free checking, no annual account fees and other benefits. You also should be able to link accounts so that if you go to the website, you can log in once and see an overview of all your accounts at the firm. You shouldn’t have to log in to each account separately.

Secondly, consider the consolidation of your accounts. Most people have too many accounts and too many investments. Often, they purchased mutual funds and opened accounts over the years for good reasons, but didn’t monitor them. Now, they have multiple accounts and funds. Not only are their finances unnecessarily complicated, but they’re missing opportunities to reduce or eliminate fees. By consolidation, you may get better service and a reduction of fees.

Manage credit cards, the rules may have changed or your circumstances may have changed. Rewards programs for debit cards generally were scaled back or eliminated over time while credit card rewards programs have improved. Study the rewards programs for your current cards. Then, manage your spending and finances to maximize the benefits.

For example, some cards give higher rewards for certain types of spending (gasoline, restaurants, etc.) and most place an annual limit on the number of rewards. It also is a good idea to compare the rewards points you earn from a card to its annual fee or other costs. Be sure the rewards you receive exceed any costs. If you’re ambitious, survey the cards available and consider changing to the one that’s best for you.

Think about refinancing your loans and mortgage. Take some time to ensure you’re receiving the best deal on your loans, especially first mortgages and home equity loans. You might be able to refinance to lock in a lower rate or a different loan term. The easy way to do this is to discuss options with your current lenders. If that doesn’t deliver a better deal, contact other lenders to find the best deal for you.

Doing the bills is a task that many of us don't like to do, so think about automation. Technology can simplify your financial life. Recurring bills automatically can be charged to payment cards or deducted from financial accounts. Many financial institutions charge late penalties,  by automating your payment, you avoid late payments and check printing costs, and save time. Automating bill payments also can make it easier to see how much you’re spending and where the money is going. By knowing where your money is going you can save more for retirement and will have money to do what you want to do.