If you want to make it big as an entrepreneur, you have to follow the footsteps of successful entrepreneurs who have been there, done that.
Similarly, if you want to plan for your retirement, wouldn’t it make sense for you to follow the advice of actual retirees, rather than a financial advisor or an investment planner?
It is precisely what we have done in this article. Below are five tips from actual retirees who successfully managed to build a solid financial foundation for their post-retirement life.
Start planning early
Many people start thinking about their retirement only when they are in their late 40’s or early 50’s. Make sure you do not make the same mistake. The sooner you start planning for your retirement, the larger corpus you can build for your golden years.
Ideally, you should start planning for your retirement in your 30’s — when you enter the prime of your professional career.
Save as much as you can, invest it wisely, and let the power of compounding do its magic.
Take full advantage of 401(k) and IRA accounts
Not taking full advantage of your employer-matched retirement account is one of the biggest retirement mistakes you can ever make.
Find out how your employer’s matching system works and make sure you contribute up to the allowed limit to take full advantage of your employer’s contributions.
For instance, if your employer is willing to match up to 50% of your contribution up to 5% of your salary, make sure you contribute 5% of your salary to your retirement account regularly.
It is a great way to build a substantial retirement fund — partly using your employer’s money — for your retirement life.
Pay down your debts aggressively
The last thing you want to do is to retire with a substantial debt burden.
Not only can it rob you of your peace of mind, but it can also make it harder for you to live on your retirement income.
Pay down your debt aggressively, as fast as you can — even if it means living well below your means.
Diversify your portfolio
Diversifying your portfolio not only protects you against inflation, higher energy taxes, more taxes, and unexpected dips and crashes in the market, but also allows you to get the best possible returns from your investments in the long term.
Make sure you invest in a wide range of assets including equities, bonds, annuities, commodities, real estate, cash and cash equivalents, and certificates of deposits.
One way to do that is to apply the 70/30 formula for your investment portfolio. When you start building your retirement corpus, that is, you should invest 70% of your earnings for growth and 30% for income.
Over a period of time, you should gradually reduce the growth portion and increase the income portion.
As you get closer to retirement, invest 70% of your earnings for income and 30% for growth.
Take care of your health
There is no point in building a substantial retirement if you are going to spend half of it on your healthcare expenses.
The costs associated with treating serious, long-term health problems can be quite substantial.
Moreover, your health condition can make it arduous for you to enjoy your retirement life, even if you saved up a lot of money. So, investing in your health is paramount.
Exercise regularly, eat home-cooked food as much as possible, avoid junk food and sugary snacks, and learn how to manage your stress properly.
Investing in your health at a young age can lead to a longer, happier retirement life.