Retirement Planning Tips You Will Need to Know for Before, During & After Retirement

Whether you haven’t thought about it at all, or you’re setting aside some money into a retirement fund, retirement planning 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.

8 Steps to Planning 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 InvestED podcast 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. Make sure it has a competitive advantage and make sure it’s on sale.

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.

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Are You Making Any of These Mistakes While Saving for Retirement?

There is no one-size-fits-all retirement plan for everyone, but there is a place where everyone should start.

With that in mind, here are 5 common mistakes you can make while saving for retirement  – and what to do if you’ve found yourself in a situation where you’ve made one.

1. You Haven’t Saved Enough for Retirement

Mistake number one is that you haven’t saved enough or that you haven’t saved at all. When I first started investing, I hadn’t saved anything.

But, the money that you invest is going to make you more money than anything else in your whole life. The earlier you start, the better.

Crank down your expenses, and crank up the income. Every dollar you can get into that retirement account now is going to make a huge difference for you down the road.

2. You’re Borrowing From Your Retirement Money to Pay Expenses

Mistake number two is that you are borrowing from your retirement money to pay your expenses. You can’t do this. Spend money on only the things you need. People often make the mistake of lifestyle creep. This is what happens when you start to make more money and you buy a more expensive car, or house with it. Quit trying to impress people that you don’t like anyway.

If you’re spending out of your retirement account, it is crucial that you leave that alone. If you spend that money you’re going to get penalized by getting taxed. Neither of those things is a good idea.

3. You’re Paying Too Much Interest on Bad Debt

Mistake number three is you’re paying too much interest on bad debt.

First of all, you shouldn’t be paying very much interest right now. Interest rates are at historical lows. If you’re paying 18% interest then something very bad is happening.

Forget about investing if you have a lot of credit card debt. The first thing you have to do is get rid of that bad debt. If you could make 18% a year, you’re doubling your money every four years. You don’t want to double someone else’s money every four years.

Another kind of bad debt is when you’re borrowing money to buy junk you don’t need. Don’t be borrowing money to go to the mall. That’s mall investing, and that’s not a great idea.

Save whatever you have to pay down your bad debt as fast as you can.

4. You’re Becoming Inactive Physically and Socially

This one doesn’t have to do with money, but with your well-being. It’s easy to become inactive physically and socially. This will play a big part in your retirement years.

You’ve got to be active physically and you’ve got to be active socially. For example, there’s a retirement community down in Florida, called The Villages, which has 110,000 seniors, and what they all have in common is they’re socially interactive and they’re very physically active. They have something like 100 golf courses down there. When I went down there to play polo 3,000 people came out to watch and they all wanted to learn about the game.

Staying active and social is so important, especially in retirement.

5. You’re Not Taking Investing Seriously Enough

Mistake number five is that you’re not taking investing seriously enough. This one happens to a lot of people because they just don’t think they can do it.

In our podcast with my daughter Danielle, she admits that she doesn’t take investing seriously (yet). She didn’t even want to learn how to invest. But, that’s all about fear and not knowing where to start.

Think about buying stocks like making any meaningful purchase. You’d do a ton of research before buying a new car or a new house, right? You can handle this. Investing is no different than that. When you take it seriously, it’s going to change your life.

Are you making or have you made any of these retirement mistakes? How are things going for you.

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Use a Retirement Calculator to Find Out Exactly How Much You Need

A retirement calculator takes into account the amount of savings you currently have invested, your age, the returns that you plan to make (or are currently making) and tells you how much you will need to retire.

The problem with a lot of retirement calculators is that they don’t take into account inflation. This is a HUGE problem because they will tell you how much you need for retirement now, in this years dollars.

They won’t tell you how much that money will be worth after inflation in 10 or 20 years. This is can be a big problem if you think you have enough saved but actually don’t because of inflation.

I’ve created a retirement calculator that solves this issue. It takes into account any inflation rate you choose so you know exactly how much you’ll actually need. Get it here.

401(k) and Your Retirement

A 401(k) program can be a very important part of saving for retirement. Especially if the company you work for matches you money. Are there any drawbacks to putting your money in a 401(k)? There could be…

The main thing to remember is to always be informed of where your money is going and if it’s growing enough for you to retire when you want to.

What is a 401(k)?

A 401(k) is a simple government program designed to take pre-tax dollars at your company and put it into a retirement savings account. Many 401(k) programs are highly structured by your corporation and they only allow you to invest a certain amount of capital in them, but many companies will add a chunk of capital into that program with you. They can match a certain amount of money that you’re putting away.

What Options do You Have When You Invest in a 401(k)?

Unfortunately, most 401(k) programs are incredibly restrictive. They’re focused on mutual funds and exchange-traded funds.

In other words, they are highly diversified forms of investing. Forms of investing that unfortunately don’t allow you to pick individual stocks. What that means is that you may end up stuck with an average rate of return of whatever the market is or less, and you’re paying fees on top of that.

I don’t love those type of 401(k) programs and I’m going to encourage you to ask your company if they would give you access to your own brokerage account so that you can invest in individual companies.

Should You Invest in a 401(k)?

You have to make a decision here because you have 2 options.

  1. If your 401(k) is being matched by your company, that’s free money and most financial advisers would encourage you to take it.
  2. On the other hand, if you’re a pretty good investor an your 401(k) program only requires or only allows you to invest in just ETFs and mutual funds, you might do better by taking the money out and just putting it into a regular IRA of your own and then invest it on your own.

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What Happens When You’re Ready to Retire

The “someday” you’ve been planning and saving for is today. It is time to retire. You may be feeling ready and excited, or you may be feeling overwhelmed and unsure. All of these emotions are completely normal as you are about to undergo a major lifestyle change.

What should you expect from this new chapter of life?

Every person transitions into retirement differently. For some, it is easy to jump into a life without work and filling time with new passions. For others, it can be difficult to find structure and develop a new routine.

Unfortunately, I can’t predict how each person will adapt to the retirement lifestyle. I can, however, provide some ideas about what happens when you’re ready to retire and what to consider before making the transition.

You Can Afford to Retire

If you are about to make the leap into retirement or early retirement, I am assuming your bank account can support it.

The first, and most important thing to consider before leaving your job is your finances. Your financial plan – saving, investing, tending to retirement accounts – should sustain you through retirement. Confirm you can actually afford to retire.

Your retirement budget should not only cover your cost of living expenses, but also healthcare costs and unforeseen circumstances. Today, people are living much longer. It would be horrible to outlive your retirement budget because of poor money management. Plan for enough financial padding to withstand a long and healthy life.

You Can Find a New Passion

Financial plans aside, you should also have a plan for your day-to-day retirement lifestyle.

Consider how you will provide structure without having a job. What can you do to live a meaningful life? Again, this is different for every person. I urge you to find a passion outside of your career. This is the time to do something you’ve always wanted to do and never had time for. Take up a new hobby, travel, cook, anything that you leaves you feeling fulfilled each day.

Whether that’s reading, (here’s some great investing books) exercising, or traveling. Do what makes you happy.

I took up polo, hunting, and spending time outdoors in my spare time…

I didn’t grow up hunting animals but I became a hunter after living for years up in the woods near Flagstaff and spending all my time outdoors.

Hunting is a way to experience wilderness more deeply and intimately than any other way I know of. For me, hunting is about everything right up to the moment the arrow leaves the bow or the bullet leaves the barrel.

It’s about being out there where animals live, in the weather, in the silence, being quiet and still inside and out.  It’s about being aware of how your body is moving, your breathing, about recognizing what you’re seeing and hearing and smelling.  It’s about amping up the senses including the ones you don’t even know you have, to a heightened level you didn’t know was possible.

As I became a better hunter I discovered I also became a better investor. Strangely, the kind of investing I do is based on some similar principles as hunting: understanding what I’m going after is paramount in both and so is the deep requirement of endless patience.

I know that for many of my students it’s politically incorrect to hunt animals and that’s okay; you must hunt or not, invest or not, depending on your own values, not mine. But if you’re not a hunter, consider reading about hunting, about what it takes to stalk an elk, say. You’ll be a better investor for learning how great hunting is done and for applying those principles to your investing work.

Bottom line is, all I’m trying to say here is to do what makes you happy. Do the things that you value, not me or anyone else. The best part of life is doing what you love.

You Can Build Strong Connections

It’s the perfect opportunity to reconnect, reaffirm, or reestablish relationships. You have the opportunity to spend more time with your spouse, your children, your grandchildren and your friends.

Sometimes, the transition from feeling “needed” in your job to retirement, can leave a person feeling as if they have no purpose. Your family and friends will be your most important emotional support system.

Find new ways to feel “needed.” Whether that be picking up your grandchildren from school or cooking dinner for your friends, your work is appreciated. The time you have invested into your career in order to get to this place will be well worth it as you get to spend time with those you love.

You Can Better Yourself

You cannot forget to take care of yourself, too. The only way to enjoy an active retirement is to monitor your health.

Because you don’t have to rush to the office, get the recommended hours of sleep each night. Take the time to prepare healthy and delicious meals. Try to exercise each day.

Feeling your best is even more of an incentive to seize each moment of your retirement doing something you enjoy.

The Best is Yet to Come

When you’re ready to retire, you can expect to feel an assortment of different feelings and emotions. A major lifestyle change calls for some thrill and some trepidation.

However, you can also expect to find a new passion, build your relationships, and better yourself mentally and physically. You’ve worked all of your life for this moment – take advantage of every minute of it!

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How to Invest After Retirement

In today’s day and age, the average lifespan of humans is increasing steadily. Medical discoveries are made every day, allowing people to live long, healthy lives. The downside? Outliving your retirement is one of the major financial concerns for seniors. Investing after your retirement is the solution.

If you’re a person who has just retired, outliving your savings may be a fear of yours. Or, maybe you just want to continue investing your money because you enjoy it.

Whatever the reason may be, if you want to continue, or even start investing, I have some tips that will help you make the process easier.

In today’s day and age, the average lifespan of humans is increasing steadily. Medical discoveries are made every day, allowing people to live long, healthy lives. The downside? People may begin to outlive their retirement savings. Investing after your retirement is the solution.

If you’re a person who has just retired, outliving your savings may be a fear of yours. Or, maybe you just want to continue investing your money because you enjoy it.

Whatever the reason may be, if you want to continue, or even start investing, I have some tips that will help you make the process easier.

Pay Off All Bad Debt

First, it is crucial that you pay off all bad debt.

Pay off that high-interest rate credit card. Downsize your house to something better suited for your lifestyle. Can you get out of a home mortgage and move to a smaller space?

Consider a retirement community. Most retirement villages are affordable and come equipped with all kinds of activities. I’ve seen plenty of communities with pools, golf courses, tennis courts, you name it.

Paying off bad debt will dramatically increase the amount of money you have to invest and reduce your monthly costs by a landslide.

Start Small & Get Smart

Next, start small and get familiar with what you understand.

I always say how important it is to understand the businesses you are buying before you invest. Do some research. What stocks are in the market that you already know something about?

Become an expert in an area you are interested in. This way, you will make more informed choices when it comes to investing based off of your insider knowledge.

Stick to Rule One

Lastly, stick to the Rule #1 investing strategy.

Focus on staying in a cash environment or a short-term bond environment with a chunk of your capital. Wait for one of the companies on your watchlist to go on sale as a result of some kind of event that happens in the stock market.

The most obvious event that occurs in the stock market is regular crashing. The market is a cycle of highs and lows. Because the last drop was in 2009, I believe we are in for another crash soon.

When that time comes, if you’re in a cash environment, you will be able to buy great companies on sale. Oftentimes, three or four years later these companies will have doubled in price.

That is how you get great returns with low risk in retirement.

Compound Interest and Investing After Retirement

When you are ready to retire, how much of your stock should you sell?

Let’s pretend it’s time to retire and we have $1 million of stock invested in a wonderful company…

Not too bad, huh?

We can sell all of our stock in the company and use that to finish paying off our mortgages, travel the world, and visit our children – or we can keep our money in the company and skim what we need from the top to live during retirement.

Which path to retirement is better?

Scenario #1: Sell All of Your Stock

When we sell the stock, we’ll pay long-term gains tax on the million and end up with roughly $850,000. Then I suppose we might invest in a government bond at 3% and we’ll have $30,000 per year after tax to live on.

This is how someone not tuned into Rule #1 would retire.

And since we play by Rule #1, we know we can invest our retirement money without fearing loss, so why would we sell 100% of our company as long as it continues to be a wonderful business?

Why not keep the million dollars growing at 15% and live on the annual gains?

Where else can you get 15% or more returns on your money? Certainly not in a government bond.

Obviously, this assumes Mr. Market is rational, which, as we know, he isn’t all the time. In the real market in any given year, the price of your stock could be far above or below the 15% increase we expect.

For a retiree, those ups and downs could create an emotional rollercoaster, especially during a stock market drop. For now, however, let’s assume Mr. Market does get it right enough for this example to be true on average.

Scenario #2: Sell Only the Stock You Need for Living (Keep the Rest Invested and Compounding)

At the beginning of that year, we had $1 million of stock and it continued to grow at 15%. This means that by the end of the year, we have $1.15 million of stock.

If we sell just those gains from that year, or $150,000 worth of stock, and pay long-term gains tax of 15%, we have $128,000 after tax to live on.

Two scenarios set up with the same amount of money, yet two entirely different outcomes. With the exact same amount of retirement money at the start ($1 million in stock), a Rule #1 investor is living on $10,000 a month while another millionaire (who cashed out of the market and bought a bond) is trying to get by on $2,500 a month.

This little compounding interest example highlights one of the great and wonderful benefits of Rule #1 investing:

After a few years, our wonderful Rule #1 business is compounding all of our money— including our gains—over the years at such a rate that, even starting with a small amount of capital, we’ll be able to live very well off our investments in a very short time.

Can you imagine just sitting there retired and watching a $10,000 investment you made 20 years ago handing you $150,000 per year with zero work on your part?

Nirvana in retirement.

Are you unsure of how much you need in retirement, or how much you need to save? Use this free early retirement quiz to calculate exactly how much you need to retire comfortably. Most people won’t have enough to retire. Find out if you’re prepared for life after work.

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About Phil Town – 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.