If you want to be as prepared as possible for retirement, there's no better time than now to take steps to revitalize your retirement plan. Here are six ways to help you do so.
1. Calculate the amount you're likely to need once you retire.
When was the last time you really evaluated your pending retirement situation? Do you have a rough estimate for how much money you'll need to live the life you want? It's difficult to imagine what this number will be, particularly if your retirement is still in the distant future, but there are tools that can help you get a grasp on what you'll need. Online calculators take information, such as your age, household income, rate of return of your investments before and during retirement, number of years you expect to use your retirement income, etc. Try Nevada State Bank's retirement nest egg calculator here. The bank also has calculators for Roth IRAs, Traditional IRAs, and Roth 401(k)s vs. Traditional 401(k)s.
2. Treat your retirement like any other weekly or monthly expense.
You can make a lot of progress with your retirement fund if you start treating it like any other regular expense. If you have the extra income to spare, determine an amount that you can pay per week or per month to your retirement account. Get in the habit of paying this regularly, even if the money isn't taken directly out of your paycheck. Pay it just like you would your electric or water bill. You might be surprised by how quickly it adds up, and if you're investing it, the gains may be even more sizable.
3. Increase the amount you're adding to your 401(k) or IRA.
Even if you're adding to your 401(k) or IRA on a regular basis, you can still increase the amount you are contributing. Try adding to it when extra income presents itself. If you get a bonus, for example, consider adding it to your retirement account rather than taking a vacation or making a big purchase. This year, IRA and 401(k) contribution limits increased by $500 to $6,000 and $19,000 respectively.
4. Evaluate your investment strategy.
How often do you look at the actual investments being made on your behalf via your retirement plan? Take a good, hard look, and determine if you feel that your money is being used in the right places. Your holdings might no longer match your target asset allocation (short-term assets vs. long-term, stocks vs. bonds, etc.). Consider rebalancing back to the asset allocation that's appropriate for your risk tolerance now. Then, as you get closer to retirement, you may want to reevaluate your holdings and shift part of your savings into lower-risk investments.
5. Find someone to help you stay on track.
If you find that you're not as disciplined as you'd like to be, consider finding a partner to help keep you on track.
On the Mint blog, Jackie Lam writes about having a "retirement account-buddy" for this very reason: "My friend Julia and I are in a friendly competition of sorts with our retirement goals. As she hopes to retire as soon as possible, she’s far more ambitious than I am. But it certainly helps us keep our retirement savings milestones top of mind. Plus, having a pal to talk finances with makes it that much more fun.”1
6. Start a new savings account specifically for retirement.
Consider opening a new savings account exclusively for retirement. Even if you have a general savings account that you use, you may tap into it from time to time for various expenses. The idea is that you don't touch this one until you're retired. In the meantime, you can add to it whenever you can, and it will draw interest over time. This can supplement the money you earn through your actual retirement plan. Learn more about personal savings accounts from Nevada State Bank here.
1. https://blog.mint.com/planning/how-to-kick-start-retirement-fund-in-the-new-year/