3 Important Tips for Planning Your Retirement

Out of all Americans, 72% of them claim to be bothered by the complexity of the U.S. tax system. But it’s not just taxes that confuse people — money is complicated, whether you’re working on retirement planning, investment management, or basic budgeting and financial planning.

Many of life’s money decisions don’t seem to have that much of an impact, such as whether you rely on a financial advisor or work out a financial plan for yourself. But your retirement isn’t something you should gamble with, so decisions like when to hire a retirement planning advisor matter a lot more than most.

To help you prepare for your retirement well, read on to learn our top three tips for successful retirement planning.

Don’t Underestimate How Much Income You’ll Need

It’s remarkable to see how many people in their fifties and sixties aren’t keeping a steady budget. It can certainly seem challenging to keep track of how much money you’re spending every single day, but it’s necessary to gauge how much you’ll need in retirement.

To start budgeting in the simplest way possible, begin by looking at your monthly income minus taxes. Then subtract every dollar that goes into a savings account, an investment account, or that little box inside your dresser. Everything leftover is what you spend each month. Now the question is, are you overspending anywhere? More importantly, are you saving enough for your retirement goals?

Talk in Terms of Dollars to Properly Assess Risks

When you’re discussing the potential for gains and losses in your investment portfolio, it’s easy to get caught up in terms of percentages. But it’s difficult to fully understand the implications of a financial decision when you’re only talking about relatives like percentages. So instead, ask your financial advisor to speak in terms of dollars earned and lost, instead of percentages.

Losing 10% of your portfolio’s value in a market pullback might not sound like much, but if you have a million-dollar portfolio, suddenly you’re talking about a decline worth $100,000. Speaking in terms of dollar amounts can help you better understand what you’re working with.

Don’t Break Your Piggy Bank

When a child has been saving dollars and quarters for a year with a big-spending goal in mind, they excitedly spend everything they’ve made as soon as they have enough, “breaking” their piggy bank all at once. It may seem obvious, but that is exactly what you don’t want to do when you enter retirement.

Not that your maturity or experience is comparable to a child’s, of course. But when you suddenly have access to funds previously guarded in restricted accounts, it’s too easy to spend carelessly like you’ve won the lottery. It’s important to know about this tendency so you can avoid it when the time comes. Just like in your working life, you’ve got to spend wisely in your retirement.

Hopefully these three tips have been helpful as you think about your retirement planning process.

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