5 Things You Should Do to Stop Worrying About Retirement Savings
Worry about your retirement savings keeping you up at night?
Join the crowd. Too many Baby Boomers are finding themselves burning the midnight oil, or worse yet, working for as long as possible, often well past retirement age.
Why? Because they failed to plan for retirement the right way.
Thankfully, there are some simple things that you can do to reduce your worry and stress, and you can quit worrying whether your retirement savings will be enough to get you through.
Pay Attention to Your Wage Value
Sure, you might make a decent living at your job, but just how well are your wages keeping up with inflation?
If you’re like most Boomers, they’re not. At all. Working hard is great. Working more than 40 hours per week is also fine. However, if your wages aren’t keeping up with the pace of inflation, then you’re really just digging yourself a hole. While there’s not a whole lot you can do about wages across the board, you can pay attention to what you’re earning.
Understand that since the 1970s, wages have been stagnant and have even begun dropping in comparison with inflation. It’s not that the dollar hasn’t kept up – your bills have definitely increased – but that employers are paying less and less each year for the same (or more) work.
Pay Off Your Debt
Yeah, it can be tough to build your retirement savings while dealing with debt, but it’s crucial that you do so. Obviously, you should avoid taking on too much debt in the first place, but once you find yourself saddled with it, you need to pay it off.
The real problem with debt isn’t the money that you owe (the principal), but the interest being charged. From credit cards to home improvement loans and everything in between.Boomers are more in debt than ever. Pay those loans off, and do it now. Interest is eating you alive.
Start with your largest credit card debts, and pay them off. Cut those cards up and throw them in the trash. Then, turn your focus on other debts and begin paying them down. Realize that you’ll never achieve financial independence so long as you’re beholden to a creditor.
Better Retirement Savings Plans
Yes, you probably have money socked away in something like a 401(k) or an IRA. You probably have stocks in your portfolio. Still, while that can give you some financial protection, it may not be the best idea.
In fact, if you take a closer look at the nastiness that started the recession in 2008, you’ll find that the stock market lost almost 40% of its value. However, the bonds market increased by 5%. In fact, investing in bonds is one of the key ways to build a passive income and actually retire early.
That’s a pretty big sign that the stock market might not be the best place to be investment heavy, particularly as we get closer and closer to peak valuation. Once we hit that high, it’s all downhill, and that’s not when you want a stock-heavy portfolio, as mentioned by Walter Updegrave from RealDealReatirement.
If You Play the Stock Market, Play It Smart
We’ve mentioned already that playing the stock market isn’t the smart move. Let’s clarify. You can put some money into stocks. They just shouldn’t make up the bulk of your portfolio. You want to go into retirement with a portfolio that’s equally diverse or weighted more toward bonds.
However, stocks can and do play an important role in retirement savings. You just need to be smart about them. Don’t jump шnto a stock once it’s hit its peak and is either holding steady or beginning to fall (many of us are guilty of this).
Don’t cling to a stock out of sentiment, hoping against hope that it will rally and turn things around. Be smart in your investing efforts. Avoid sinking ships, and focus on finding stocks that are just starting their rise, or that hold steady with a slight uptrend over time.
Watch out for a flash in the pan stocks that look like great deals right now, but will leave you shirtless in the end.
Live Below Your Means to Build Retirement Savings
If you want to be comfortable during retirement, you need to live below your means while building that nest egg. That runs contrary to what most of us believe.
After all, you put in long, grueling hours on the job. You need some sort of reward for that, right? It might be a larger house. It could be a flashier car. It might be a new wardrobe or nights out on the town. Fancy dinners, a new wine cellar – these are all examples of living beyond your means.
Don’t do it. In fact, don’t even live at your means. Live below them. By living below your means, you’ll be better able to save for retirement and plan your investments correctly. If you look at those who’ve actually been able to retire early, many of them lived below their means, paid off their debts and made savvy investments outside the stock market.
There you have them – five things you can do right now to stop worrying about your retirement savings. Perhaps the most crucial tip is this: Don’t put your faith in the stock market because it is likely to melt down.
The furor caused by Brexit is just one example of how international events that have little to do with things here at home can make markets go nuclear. There are plenty of others.
And remember that we’re still approaching peak valuation – the point at which the stock market will take an inevitable slide down to the bottom. Once that occurs, experts predict it will be another 40 years or so before it regains its position.