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.