Making, Saving, And Investing Money For Retirement
Financial planning for retirement can feel overwhelming, but it doesn’t have to be. With the right strategies, you can build a solid financial foundation and enjoy peace of mind.
I retired from the daily grind at age 48. While I didn’t quit working entirely, I worked only where and when I wanted to, which had a huge positive impact on my life.
If you want to “retire on your terms,” I’ll share twelve proven money tips to help maximize your income, savings, and investments as you plan for a secure financial future.
Let’s get moving. With intelligent planning, early retirement can be yours faster than you think!
Financial Planning For Retirement – 12 Steps To Take Now
Disclosure: At no cost to you, I may get commissions for purchases made through links in this post.
1. Increase Your Income
When financial planning for retirement, seek ways to make more money now. Consider the following ways to add to your income:
Ask for a raise. Get paid more for doing what you do today.
Climb the ladder at your current employer. Seek greater levels of responsibility and the compensation that comes with it.
Work more if you get paid by the hour. Seek premium pay for overtime.
Change employers. Make more money for the value you provide by working for someone new.
Create a dual-income household. If your kids are grown, now is the time for you and your partner to work or side hustle for additional income.
Rent out your real estate. Consider renting a room in your house, the condo you just moved out of, or your vacation home.
Invest for more income. Your financial investments (cash, bonds, and stocks) can be an excellent source of extra income from interest and dividends.
Not sure where to start investing for more income? If not, learn how by checking out the Financial Freedom Dividend Investing Course by Simply Investing.
2. Make A Budget And Monitor It Monthly
Set a budget every month and do your best to stick to it.
Break your spending down into categories such as:
- Housing (rent or mortgage)
- Utilities
- Groceries
- Transportation
- Entertainment
- Travel
At the end of each month, compare your spending to your budget for each category. Reflect on your progress and make adjustments as needed.
Don’t beat yourself up if you overspend. Learn from it and strive to do better in the future.
Related reading – How To Track Spending for Your Budget
3. Downsize Your Housing
Housing costs typically take up the largest share of a household budget. Consider reducing these costs through downsizing.
Most importantly, avoid buying or renting a larger-sized home than you need. A smaller footprint comes with lower mortgage payments, reduced rent, cheaper real estate taxes, utility bills, and insurance costs.
4. Spend Wisely On Automobiles
After housing, autos and transportation costs consume a large share of your household budget. Fortunately, controlling your spending in this area is pretty straightforward.
First, keep your vehicles as long as practical.
Updating your car is a balancing act because you don’t want to spend too much on costly repairs and maintenance on an aging auto.
When it’s time to replace your car, buy a used vehicle.
The first year of ownership of a new auto is typically more expensive due to the steep depreciation after a new car is pulled off the lot. Buy used and bank the savings.
5. Spend Only On What You Value
Think carefully about what you value in life. What you love may include travel, movies, home renovations, dining out, wine, sporting events, or something else.
What you value is unique to you. So, whatever it is, allocate money in your budget to what you love and value. Then, reduce or eliminate expenses everywhere else.
Helpful Tips – How To Control Your Spending
6. Top Off Your Emergency Fund
Emergency expenses are the enemy of your finances, especially during retirement. Thus, assign any extra money from your monthly budget to emergency savings.
Most financial experts recommend having 3-6 months of living expenses available.
Review your budget’s essential monthly expenses to determine your optimal emergency fund balance. Put the extra money in a high-interest-bearing savings or money market account.
Finally, reserve your emergency fund for unexpected and vital expenses like:
- Medical bills
- Auto repairs
- Home maintenance
So far, so good. But I have much more to come. Before you continue, please PIN IT so you can refer to this post later:
7. Make A Plan To Become Debt Free
Identify and itemize your debts. Use excess cash from your monthly budgeting process to reduce your non-mortgage debt.
Most people owe money for:
- Credit cards
- Student loans
- Auto loans
- Personal loans
Pay off your credit cards first. Then, target any other loans you have. Making timely payments will improve your credit score.
By the time you retire, I urge you to be debt-free for the peace of mind it offers.
8. Maximize Investments In Retirement Accounts
Increase your savings rate for a secure retirement by contributing to your employer’s 401(k) or 403(b) plan.
Most employers will also contribute to your account (employer match). But you must participate at a minimum level to receive your employer’s match. So, check with your human resources department and get signed up!
Alternatively, if you earn income but don’t have access to an employer retirement plan, you can contribute to an Individual Retirement Account (IRA).
There are two types of IRAs: Roth IRAs and Traditional IRAs. Either type is a good choice, but each has pros and cons.
9. Invest Outside Of Retirement Accounts
Invest in a taxable brokerage account after all your savings goals are addressed. Investing wisely can dramatically better your finances over the long run.
Stocks and low-cost exchange-traded funds (ETFs) are the best investments for most investors. These investments are easy to buy and hold in an online brokerage account. I prefer dividend stocks for the regular passive income they offer.
I learned a ton about dividend investing for retirement by taking the Financial Freedom Dividend Investing Course by Simply Investing.
Most importantly, learn as much as you can before investing. Knowledge is power. After all, it’s your money. Invest it wisely!
10. Establish An Asset Allocation Target
Allocate your investment assets so a drop in the financial markets won’t ruin your finances.
For example, here is a conservative asset allocation model:
- Cash/risk-free assets – 10%
- Bonds – 30%
- Real estate – 10%
- Stocks – 50%
Your asset allocation should be suitable for your age and risk tolerance. Just remember that higher allocations to real estate and stocks mean a greater risk of loss in the short term.
Cash and bond values are more stable. However, historically speaking, stocks and real estate offer better long-term investment returns.
Dig Deeper – How To Invest Money and Make It Grow
11. Review Your Investments Annually
Review your investments at least once per year.
First, understand all your investments and why you own them. Second, ensure your asset allocation hasn’t drifted from your target. Finally, ensure your investments make sense for your age and risk tolerance.
12. Enjoy The Journey Before And During Retirement
Money is essential before and after retirement, but it isn’t everything.
Enjoy the journey. Make time for the activities and people you care about.
Finally, find satisfaction from the financial security of building your retirement finances.
Okay. That’s all for today. Here are a few parting thoughts.
Financial Planning For Retirement – Wrap Up
Planning for retirement is one of the most empowering steps for your financial future. You can set yourself up for lasting security and peace of mind by taking action now.
Whether you’re just starting or fine-tuning your approach, staying proactive and flexible is the key. Remember, every small effort you make today brings you closer to enjoying retirement tomorrow.
Good luck with your finances, and keep moving forward! Before you go, PIN IT:
Author Bio: Tom Scott founded the consulting and coaching firm Dividends Diversify, LLC. He leverages his expertise and decades of experience in goal setting, relocation assistance, and investing for long-term wealth to help clients reach their full potential.