Saving for retirement can be daunting especially when you think of the years it can take to establish a pot of money that will last for the duration of your life. However, it may be possible to retire earlier than you think if you follow these keys to a successful retirement.
Key# 1 – Establish attainable goals
To have a successful retirement, it is important that you establish reasonable goals. What do you want your retirement to look like? You may want to retire at a certain age, live in a certain area of the country, buy a second home, etc…All of these goals can be successfully attained with proper planning.
Key# 2 – Set a monthly budget
Maintaining a budget is a critical part of being able to retire. Adhere to the motto “Live below your means”. This means your expenses should be below your monthly income. For example, if your take-home pay is $5,000, establish your living expense budget at $4,500 per month. Some of this should be set aside as a buffer for unexpected expenses and some should be invested in your retirement account. Track your budget success by using a spreadsheet, on-line app or computer software such as Mint.com which allows you to link your bank accounts and credit cards to track money coming in and out.
Key# 3 – Save consistently
Remember the saying “Rome was not built in a day”. The saying also applies to saving for retirement. It will take time to achieve your retirement savings goal. It may take 10, 20 or 30 years to reach your goal. Put aside money every month. Budget a dollar amount that you can live with over the long term and be consistent every month.
~Novel Serialisation: Heavens Fire~
Key# 4 – Invest wisely
Follow the adage “Don’t put all your eggs in one basket”. Good advice when investing your savings. Be sure to spread your money over multiple investments consisting of mutual funds or exchange traded funds with different asset classes. A diversified portfolio should minimize risk and provide a smoother ride toward your retirement goal. Following is an example of a diversified portfolio with different asset classes:
International stocks 15%
U.S. Large Cap Stocks 20%
U.S. Small Cap Stocks 15%
Real Estate Investment Trusts 5%
Intermediate term bonds 15%
Short Term bonds 25%
Cash 5%
This is one example and may not apply to your circumstances. A financial advisor can help you establish a diversified portfolio that fits your needs.
Key# 5 – Have a reasonable retirement age and living expense level
Now that you have established your goals, savings amount and investment strategy the next step is to define your living expense level and retirement age. Your living expense level is one of the most important levers in determining when you can retire. The more income you need in retirement, the more years in which you need to save. Your retirement age should be based on when you reasonably believe you can retire based on your savings to date and future savings ability. Bottom line, the more you have saved the fewer years you may have to wait to retire.
The keys to a successful retirement are easy to implement but can be difficult to maintain over a long period of time. Therefore, you should consider hiring an investment advisor who can help keep you on your path to retirement. An investment advisor can also provide the ongoing advice and investment monitoring that can be critical to retiring when you want versus being disappointed and retiring later than you anticipated. What kind of retirement do you desire?
By Mario Hernandez
Mario Hernandez is a partner at Gemmer Asset Management LLC. Mario has been at Gemmer Asset Management LLC for 23 years and serves as the financial planner for in-house clients. Mario heads up the Wealth Management division at the firm and is a Certified Financial Planner. Mario provides holistic planning for clients and specializes in helping clients prepare for retirement. Mario has over 25 years in the financial planning and investment management business. Mario’s email address is mario@gemmerllc.com
