Worrying about Finances Sucks.
With the improving economy, consumer confidence and spending are going up. But so are lifestyle inflation and its evil sister DEBT. At the same time, the recent stock market turmoil has quickly reminded people that investing isn't always easy. Consequently, many have left their retirement planning behind, often because it's just so confusing or investing done wrong is just so stressful. Fear not however, solutions are at hand.
Whether you are just entering the work force or entering your golden years faster than anticipated, there are a few steps you can take now to spruce up and de-stress you retirement plan. The sooner you get started, the easier the road ahead will be to reach that desired day of financial independence, the day where working becomes an option and not a necessity. A skilled financial planner can help you get your financial house in order. You've worked hard to be financially secure, let me do my job and help you enjoy your Golden Years.
I've spoken with many pre-retirees who have been losing sleep over their retirement plans, and even more who have been completely ignoring their accounts for years. I hope to offer a few tips to help reduce the stress as you get your financial plan back on track.
One of the most common requests I get from people about to retire is they "don't want to worry about all this crap anymore." They want a financial plan to help relieve some of the stress managing their finances of day to day. Many people hate dealing with anything to do with money (other than spending it), and when you hate dealing with something you may ignore it. As you can imagine, ignoring your finances may be one of the worst things you can do. A trusted financial planner can take some of this laborious work off your plate, let them worry about this stuff.
If you prefer to pull your few remaining hairs out when thinking about financial topics STOP READING NOW. But if you prefer to make the journey through your working years more financially beneficial, follow these few tips.
- Make it automatic: Whether you are making payroll deducted contributions to a 401(k) plan, or using an IRA or Roth IRA have your automatic contributions in place at least monthly. Set it up like any other bill on autopay. When it's automatic, it actually happens.
- Maximize any employer contribution: Would you turn down a raise if your boss offered it to you? "NO! DON"T GIVE ME 3 to 6% more salary tax-free!" Sounds ridiculous right? By leaving the company match on the table you are essentially turning down free money. Figure out what the company matching policy is, and at the very least contribute enough to get the full match.
- Ignore the news and don't try to time the market: The stock market values move every second. You can stare at it all day and stress yourself out, but to be honest this will in no way do anything to increase your odds of reaching a comfortable retirement. On the other hand, all that stress may make retirement planning a bit easier if a heart attack kills you at 50, just saying. Dollar cost averaging (putting in money to your account regularly) helps reduce the need to really worry about when your money is going into the account. While this doesn't eliminate risk, putting smaller chunks of money in at a time does help reduce the risk of your portfolio over time. Best of all if reduces the chances of your falling for the trap of either irrational exuberance or irrational despair and trying to time the market.
- Work with a professional: The earlier you sit down with a trustworthy financial advisor -- preferably a Certified Financial Planner -- to get your retirement road map on track, the easier may be to reach financial independence. They can help you set up a comprehensive strategy to help reach your specific goals, and help make sure you are taking full advantage of the opportunities you have available to you. Not to mention you can put all the stress of watching your retirement accounts on them. Let me spend hour pouring over financial news, and don't let reading this article keep you from your maitai on the beach.
- Be proactive: No one wants to think about getting older or cutting back on spending. But do you really want to be 80 and still have to work? Personally, I love my career and I plan to work forever, but I'm realistic and want to have the option to retire as soon as possible. Also, are you sure you will you be able to work full time at an advanced age? Who knows? At least if you get a financial plan on track you may have the choice and can choose to keep working. If you start at 35 you will have to put away a much smaller percentage of your income than if you start at 50. Now, if you start at 60 good luck. Let compound interest be your friend.
To recap: Make retirement planning a priority, make it automatic, maximize your employer's matching and other benefits and get your financial house in order NOW. Don't stress over the day-to-day movement of the stock market, it really doesn't matter what happens today when you are years away from retirement. Working with a professional who can help pick the appropriate investments for your situation and risk tolerance, and more importantly help you figure out how much you need to be putting away each month, will help you manage a good life now as well as the retirement of your dreams.
DAVID RAE, CFP®, AIF® is a Los Angeles-based Financial Planner with Trilogy Financial Services specializing in retirement planning. A regular contributor to Advocate Magazine and other news outlets focusing on financial issues in the LGBT community, he posts regularly on Huffington Post as well. Follow him on Twitter @davidraecfp Facebook.com/davidraecfp . For more information about his experience and service visit his website, www.davidraefp.com.
Securities and advisory services offered through National Planning Corporation (NPC) , member FINRA and SIPC, a Registered Investment Advisor. Trilogy and NPC are separate and unrelated entities. The opinions voiced in this article are for general information only. They are not intended to provide specific advice or recommendations for any individual and do not constitute an endorsement by NPC. Dollar cost averaging does not assure a profit or protect against loss in declining markets. Such a plan involves continuous investments in securities regardless of fluctuating price levels of such securities and the investor should consider his/her financial ability to continue purchases through periods of low levels.