Too often people under the age of 50 view retirement planning as an action to consider once they are 50 or older. Unfortunately, the time to start retirement planning is really the day we start working. One thing that can help if we look at retirement planning as more as an effort to achieve vocational freedom.
What are the vocational freedom strategies when beginning your working life?
Start with 401k contributions or other retirement savings at the level of getting the company match if they offer one. Starting early makes it less of a commitment all your life and getting the company match is a real bonus. If you don’t get the company match it is leaving free money on the table
How should planning be viewed as one is entering their 30s?
This is the last chance to make vocational freedom savings easy, hit the 10% or more of your own contributions. If you have kids avoid funding their education before funding your retirement. This is also a good time to start with estate planning basics and consider protecting your family with life and disability insurance if you don’t have any of these products.
Why are your 40s such a defining moment in retirement planning?
This is your last chance to have 20 or more years to make up any deficiencies without too much pain. It is also the time you should have an in depth look at your progress and start making other decisions with retirement in mind. These decisions include avoiding debt and not going bigger on house and cars. Anything that is a stretch financially or would impede your retirement efforts should be avoided.
What are the moves when in your 50s that are important?
It starts with utilizing the catchup contributions for retirement available to those 50 and over. Aggressive debt reduction is extremely important for this phase of your life. If you have the funds, build your HSA and also start stockpiling cash outside of retirement. This is also when you need to engage with a planning professional so that you can be sure to achieve vocational freedom on your timeline.
How should people handle today’s economic environment?
Right now is a time that many might not be able to step up any retirement contributions and in fact may be tempted to stop any contributions or withdrawal from current retirement savings. If possible, keep the minimum amount in contributions instead of stopping all together. It is easier to increase than it is to completely start over. Look for all possible alternatives to withdrawing retirement savings, perhaps even taking a loan against your savings. Maintaining some vocational freedom effort is important for your long term financial goals.
What is the final move to make in planning for vocational freedom?
When you are a few years away from when you want to retire, build a budget based on your expected retirement income and see if you like your retirement lifestyle. What you will learn is if you can retire on your planned date or if you can retire sooner or have to work longer. A test run is a great way to make sure you have the retirement you were expecting.