Three Things To Make Retirement a Reality
Gen X and Gen Y workers, as a group, don’t believe that retirement is an option for them. In a recent survey, 30% of workers aged 35-45 said they “strongly disagreed” that their retirement would be like their parents and grandparents. Of workers aged 25-35, over 50% of them don’t expect to have the typical retirement. Of course, surveys are notorious for missing the subtleties. We don’t know if those surveyed are upset about their feelings. Certainly some recent books about Baby Boomer retirement could lead you to speculate that retirement as we imagine it — golf courses and RVs — is a thing of the past.
1. Put money aside in a retirement fund. In other words, contribute to your companies’ 401k plan or open an IRA or Roth IRA. People sometimes get paralyzed with options — Roth vs 401k? 401k rollover? Where do I allocate my 401k funds? Luckily these are easy questions to answer. Why choose between Roth and 401k? You can do both and, in my opinion, you should do both. The Roth account grows post-tax and the 401k grows pre-tax. When it comes time to draw money out, the Roth IRA distribution comes without a tax hit. That helps soften the blow of the taxes you’ll owe on the 401k money. Should you do a 401 k rollover when moving jobs? Yes, you should. As to how to allocate your funds with the 401k account, there are lots of great places to seek advice on that. For me, it’s all about risk and mitigating risk. I have over 20 years before I need to touch the money in my retirement accounts, so I’m going to take some risks, but not as many risks as I took 20 years ago when I was first starting my career.
2. Live within your means. How much money do you make each month? How much do you spend? How much debt do you have? If you spend more than you make or, even if you spend everything you make, there’s nothing left for savings. I can speak from experience that money is like water, it will fill any container you give it, so a raise in pay just means that you can buy more stuff, right? Only if you want to be working when you are 70. Take a look at your monthly expenses. How do they compare with your take-home pay? You want to be in a place where you spend significantly less than you make. At least until you have paid off your debt. Learning to live within your means is perhaps the best life lesson you will ever master. When you live within your means, funding a 401k and a Roth becomes easy. You can jumpstart the Roth with a 401k rollover/Roth transfer. This type of transfer can really get the ball rolling. You could call it the start of a 401k plan rollover retirement lifestyle!
3. Do the work you love. I know this sounds crazy, but if you want to make enough money, live happily and retire when you are ready, find work that you love. The money will seem to flow easier when you are working in a field you are passionate about. If the work you love isn’t well paid, that’s OK. Who said you need to be a doctor? (besides your mom, of course.) Do work you love and live within your means. That’s all you need to do. If you enjoy your work, who knows when you’ll want to retire? You could continue to to work in to your 80s if you want. And if you live within your means, you have enough money. The other benefit of finding work you love? You’ll live longer! Be healthy and happy now and you ensure that you’ll have a lifetime of health and happiness.
