8 Ways to Get a Head Start on Your Retirement

Whether you haven’t thought about it at all, or you’re setting aside some money into a retirement fund, preparing for retirement is crucial to establishing your future.

The preparation process takes knowledge, tools, and time, but you can do it. It’s hard to invest if you don’t have a plan. By having a plan I mean, what lifestyle do you want to live when you retire? How much will that lifestyle cost you? Once you can answer those questions, you’re headed in the right direction.

Watch this video below to learn 8 steps to prepare for retirement.

The 8 Ways to Prepare for Retirement

1. Find Out What Kind of Lifestyle You Want Later in Life

Decide right now how much you want to live on for the rest of your life. How much will you need to live the same lifestyle that you’re living now? Money grows exponentially through the power of compound interest over time.

2. Get an Investing Education

What is happening with your money? Speak with financial planners, friends, your spouse, your kids. Read books and articles, and listen to my podcast, InvestED for an honest conversation about investing. There are no stupid questions. I offer a free investing course if you want to spend some time learning how to invest.

3. Get Rid of Any Bad Debt You May Have

High credit card debt with 18% interest is bad debt. You can never make a decent return on your money when you are paying 18% on your debts. Invest in wiping out your high credit card debt and save 18% more a year.

Bottom line: get rid of it and it’s the same as an 18% return.

4. Take Inflation into Account

Inflation is like compounding interest that works against you. It takes a tremendous toll on what you will need to have available in your retirement fund to support your lifestyle.

5. Find Out What Your “Number” Is

Your number is the amount of money you want to have when you retire to live comfortably. The number is probably larger than you think, and it may scare you. Work toward that goal by taking serious action now. I have a free retirement calculator that you can use to calculate the exact number you’ll need to retire.

6. Start to Research Investments That You Understand

Make sure you know what you’re putting your money into. What is the meaning behind your investment? Also, invest in a business, and make sure it’s a good one. Make sure the person running it has integrity. Here is a quick exercise that you can use to find businesses that you understand called the 3 Circles exercise.

7. Figure Out Which Investment Vehicle Will Work Best For You

As an investor, you need a place to house your money and actually do your investing.

That’s where choosing an investment vehicle comes into play. What an investment vehicle? An investment vehicle is simply the method by which you invest your assets and control your money.

Depending on what investment vehicle you choose will determine fee structures, costs, and benefits. Types of vehicles include IRAs, 401(k)s, Roth IRAs, bonds, mutual funds, and more. You want to choose an investment vehicle that allows you to invest freely in any business that you’d like, without being taxed.

8. Open a Trading Account

Opening up a trading account is just like opening up a checking account. No difference at all. There are many websites, like TD Ameritrade where you can open a trading account with no minimum balance. It’s simple.

Following these 8 steps will get you back on the right track. Establish the future lifestyle that you want and start working toward it now.

I recently released a FREE online investing course. In the course, you’ll learn how to invest with certainty, Rule #1 fundamentals, and the investing secrets that Buffett, Munger, and Einhorn all use. Click the button below to learn more.

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Phil Town is an investment advisor, hedge fund manager, two-time NY Times best-selling author, ex-Grand Canyon river guide and a former Lieutenant in the US Army Special Forces. He and his wife, Melissa, share a passion for horses, polo and eventing. Phil’s goal is to help you learn how to invest and achieve financial independence. You can follow him on google+, facebook, and twitter.

  • Jon Coppock

    Thank you Phil,

    I’m not lucky enough to be brilliant, and only time will tell if I posses the kind of brain power needed to be able to successfully determine a companies true intrinsic value.

    lucky for me I am smart enough to recognize that mutual funds are a rip off and that I should exit my companies default fund as quickly as possible. That was my first step.

    My “Berky” is the company 401K plan. This is my chosen vehicle, and what I find most appealing is that I get an automatic return on my investment of 36% for the first 6% of my investment. Because I’m investing at 12% before taxes, that also reduces my overall taxable income and saves me money there.

    This means that as soon as I invest my 12% in the company 401K plan, I get a company match that equals 18% of my contribution. Now I need to take this bundle of cash to the market and make a return, in order to do this I have opened a SDBA or a self directed brokerage account inside of my company 401K plan.

    From what I understand this option is available because of rules and regulation changes after 2008 that employees demanded due to huge losses in the stock market, whatever, it means that I can sidestep the freakin fund manager who uses my money to enhance his/her personal lifestyle at my expense. They will have to find a new cash supply, because I’m out of there.

    In order to move my cash over to the liquid SDBA holding account my capitol had to be invested in something other than a mutual fund, the capitol had to be in a stock or other type of investment like an index, at least that is the way I understood it, so I bought one of the other investment options that were automatically available to my companies 401K plan.

    This meant that I ended up buying the Blackrock Russell 2500 index as a way to be able to then transfer my capitol to the SDBA account that I just opened. Due to the rules, I have to wait 90 days after I move my money out of the mutual fund to reinvest it in my self directed brokerage account due to something called “Money Wash”.

    I’m not sure if this is only related to my companies 401K plan or the bank my plan is administrated through, I only know that it feels like someone is messing with my money and telling me what I can and can’t do with it. This is part of the reason I’m on this path, because I’m tired of not knowing or understanding what’s happening with my money and being taken advantage of by people who know more than I do. The more I learn, the more power I get over my situation.

    I read Dhandho investor and The education of a value investor, as well as The Little Book that Beats the Market and The intelligent Investor along with six or seven others. From all this reading I can readily say that if I were half as smart as the authors of these books, I would have done something more impressive with my life than I have, and would not be forty eight and broke with over three hundred thousand dollars in debt including my mortgage, student loans, and small personal loans.

    I admire the minds of Buffet, Pabrai, Spier, Munger, Greenblatt, as well as a host of others including the work you have done Mr, Town, as I have read Payback Time and Rule #1 and watched almost all of your YouTube videos including the entire InvestED series. What I can honestly say is that compared to the likes of men like you and these others, I fall way short in mental ability.

    My investment strategy for the immediate future is to transfer my capitol to the SDBA and direct 100% of my future 12% contribution to the SDBA where I will dollar cost average 20% of my total capitol over a one year period into the Vanguard S&P 500 and then continue to invest at a set rate of 200 dollars a month for the next 18 or so many years.

    With the remaining 80% of my capitol I will be using Joel Greenblatt’s magic formula from his website to pick 30 stocks, buying all 30 in groups of 7 to 8 every 3 months until I own them all. I will invest the first year 200 dollars per stock and I will hold each for a minimum of one year, selling those that I will loose money on ( YES, I know, RULE #1 but what do I know of valuing a company and stock analysis ) just days before the one year mark in order to realize the loss as a tax deduction, and selling those that I will make money on just days after the one year mark in order to translate the gain from a short term to a long term holding and save on taxes. I will then replace those that I sell with seven or eight more frome the updated list on Greenblatt’s site. In the event that the site goes down or is no longer available, I will have to find an alternative site that basically does the same thing, or learn to do it myself for the S&P 500.

    Because I just barely understand Greenblatt’s formula and how it works using earnings and return on invested capitol to create a score card for some good companies, I’m willing to stick with this investment strategy for a minimum of six to seven years in order to give it the time needed to prove its value. While I’m running this experiment I plan to deepen and widen my canyon ( I like Coffee and Water for now ) becoming a subject matter expert and looking for a handful of companies that I can understand, with a durable competitive advantage and good management that I can buy within a margin of safety. By year two of this investment strategy I plan to be picking individual stocks, of course, that’s If I can actually get my head around the numbers and develop a process for valuation that actually delivers good results, but I may not be smart enough for all of that.

    In the event that Greenblatt’s formula fails (chances are against that) or that my temperament will not allow me to stick with it, I will move onto something else, but I’m praying things work out because I don’t think I have many chances left.

    The 12% that I contribute every month to my 401K will be distributed in this way until I retire at age 67, if I do well, I stand a good chance of having greater than three million dollars by conservative estimates, but what do I know, I’m a simple, died in the wool blue collar guy who never made much of himself and is just lucky enough to be born in the USA where I stand a chance of following in the footsteps of the giants who have gone before me, leaving clues to a better life in their wake.

    God willing, it will work out well for my family and I.



    When you start you don’t know where to start

    So thank you providing a guideline for young and not so young people to get their thinking straight about planning for their future.

    Your approach put emphasis on compounded interest and I like the comparaison with pine trees.

    I agree that reading should be the first fight to overcome.

    I was no big reader at the beginning but like you say when you read what you are interested about or on the business that you like it is way easier.

    Then, the knowledge comes.

    “I don’t want you to be part of the problem

    I want you to be part of the solution”, I like.

    When you start to think you know you get all excited and want to jump in the market. I always keep repeating myself your kind word “Understand before investing” so sometimes is slow me a little.

    Best foundation for a starter are your books, podcast and videos.

    Thank you.