5 Ways to Better Prepare for Retirement

Retirement might not be at the forefront of your mind if you are in the middle stages of growing your wealth, but the earlier you start preparing, investing, and saving for it, the more financially secure you should be when that day finally comes.

Planning for your retirement consists of multiple processes that need to be set up long before you finally retire. To have a comfortable, secure, and enjoyable retirement, it’s important to build a strong financial cushion that will fund it all.

Here are 5 ways to build a solid plan for your future that will better equip and prepare you for retirement.

#1 Define Retirement on Your Own Terms

You may not have the answers now, but I recommend giving it some thought as to what you want your retirement to actually look like. For many entrepreneurs, retirement isn’t about just walking away from your business. It’s about what comes next as one chapter in your life comes to a close. This could be a time where you find and train a successor for your company and take a part-time advisory role, start a side business, or even pursue a hobby on a semi-professional basis. Your retirement plan could also mean selling your company and dedicate as much time as possible with your children and grandchildren.

The most important consideration is to make sure you’re preparing to make your years in retirement as fulfilling, stimulating, and rewarding as possible.

#2 Understand Your Time Horizon

Your current age and expected retirement age will indicate your starting point when planning an effective retirement strategy. Generally speaking, the longer the time between your current and retirement age, the higher the level of risk your portfolio can withstand. For example, If you’re are 32 years of age and you plan to retire at 55 years old, you’ll have 23 years to go until retirement, which means you should have the majority of your assets in riskier investments, such as stocks over bonds, as it’s better to focus on returns that outpace inflation so you can maintain your purchasing power during retirement.

Generally, the older you are, the more your investment portfolio should focus on passive income, and the preservation of capital to live on. You will also have less worry about inflation compared with someone half your age.

#3 Determine Your Retirement Spending Needs

Setting realistic and measurable expectations about your retirement spending habits will help you define the required size of your retirement portfolio.

Many people make the mistake of believing that once they reach their retirement, their annual spending will amount to only 60% to 70% of what they are currently spending. Such an assumption is often proved to be wrong and can lead to a dangerous reality when retirement eventually comes. Retirees also sometimes spend their first or second year splurging on travel and other luxuries.

Precise retirement spending goals help in the planning process as more spending in the future requires additional savings today. Analytically examine your fixed costs by week, month, and year (recurring and once-off) and see what you can scale back. Work on eliminating debt so you can increase your retirement contributions. Doing this today will eventually set you up for success when retirement does come.

#4 Focus on Saving and Growing Your Wealth

If you are concerned about not having enough income to fund your retirement lifestyle, focus on increasing your income and making smarter investment decisions that include diversification. Use the extra investment income to reduce debt so you have more for the future. Living below your means allows you to increase the money you have to invest in the future.

Additionally, If you have high-interest debt, try and see if you can refinance it at a lower rate than what you are currently paying. Generally, collateralized debt, like a vehicle loan, will have a lower rate than unsecured debt, like credit cards or medical bills. Real estate-based debt is generally tax-deductible and can be financed over longer periods than most other forms of debt. Any money saved due to refinancing can go into your investment portfolio.

#5 Get Professional Help from a Wealth Management Professional

Planning for retirement means looking at your finances differently, from your assets to your liabilities. By speaking with a professional financial advisor about your concerns, investment risk, tax planning, and lifestyle goals can go a long way to retire successfully.

No matter where you are in the retirement planning process, I can offer realistic and actionable advice that you can use immediately to make the process more attainable and help you reach your goals more comfortably.

I am Giles Maynard. I provide individual investment and wealth management services for private clients and companies. I have been trusted by clients, large and small to manage, protect, and preserve their wealth. How can I help you with yours?