Regular contributor Emily Guy Birken has just released a new book: The Five Years Before You Retire. Read on for her suggestions on how to make 2014 a great year for your retirement portfolio — and for a chance to win a copy of her book!
Saving for retirement is something like cleaning out the basement: you know you need to work on it, but it’s something you’d rather deal with later.
Unfortunately, putting off retirement planning has much more dire consequences than letting your old CD collection and athletic equipment gather dust. Missing out on investment opportunities and the magic of compound interest could haunt your golden years in a way that losing your copy of Appetite for Destruction never will.
Here are three simple steps you can take in 2014 to get your retirement planning on the right course:
1. Automate Your Retirement Savings
It can feel almost impossible to put aside money for retirement when there are so many financial needs in the here and now. After paying for your mortgage, your kid’s mouth full of braces, and unexpected car repairs, having extra money to put aside for the future may feel like a luxury you simply can’t afford.
That’s partially because many people regard saving for retirement as what you do after you’ve paid all your other bills. Instead, pay yourself first by setting up an automatic deposit into your retirement account on payday. Starting with a small amount, like 1% to 2% of your salary, will keep you from feeling the loss.
This can work even better if your employer’s retirement program offers something called a contribution rate escalator, which will automatically increase your savings rate every year. That means you can plan for portions of your future raises to go toward retirement — rather than lifestyle creep.
2. Meet with a Financial Adviser
Many people think you have to be at the Scrooge McDuck level of wealth before you need a financial adviser, but nothing could be further from the truth. Financial advisers can help you determine how much you’ll need to retire, what types of investments will help you get there, and how to periodically re-balance your portfolio. Even the most dedicated do-it-yourselfer can benefit from the expertise of a trusted financial adviser.
However, finding the right financial adviser is not necessarily an easy task. Between the intimidation factor (there’s quite a bit of financial jargon) and the fact that pretty much anyone can call him or herself a financial adviser, it can seem almost impossible to find one you trust.
That’s why it’s important to interview advisers until you find one to be your ally in retirement planning. Just like you wouldn’t trust your children with a babysitter you haven’t vetted, you shouldn’t trust your retirement to any old adviser. Make 2014 the year that you interview and choose your trusted adviser. (You can find a list of helpful financial adviser interview questions in Chapter 4 of The Five Years Before You Retire.)
3. Create a Second Income Stream
Even the best retirement plan can be derailed by unemployment, medical bills, debt, or other financial problems. In these tough situations, you may stop contributing to your retirement accounts — or worse, be tempted to spend what’s in them.
In addition to having a robust emergency fund, another good way to protect your retirement from financial bumps in the road is to establish and maintain a second income stream.
Considering the fact that modern technology offers some non-traditional options for making extra money, generating a second income stream is much easier now than it would have been even 10 years ago. You can often do a second job from home in your pajamas — and it can be easy to base that job on one of your hobbies. Blogging, selling crafts on Etsy, and becoming a mystery shopper are all great ways to generate some extra income.
For more advice on how to prepare for retirement, check out The Five Years Before You Retire. We’re giving away one copy of the book to a lucky reader. Enter to win below.
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They developed this pretty nifty 401K Fee Analyzer that will show you whether you are paying too much in fees, as well as an Investment Checkup tool to help determine whether your asset allocation fits your risk profile. The platform literally takes a few minutes to sign up and it's free to use by following this link here. For those trying to build wealth, Personal Capital is worth a look.
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Thx for the giveaway! -AJ ( looking forward to retirement in the next fewcyears)
This would be a great tool for our retirement hopefully in the next 10-15 years.
Thanks for the giveaway
I’m five years away from retirement right now. I’ll definitely read this book, especially the section on meeting with a financial advisor. Knowing what questions to ask when selecting an advisor will save me time and money!
We are five years away from retirement and this book would be very helpful for us right now!
Thanks for the giveaway!
I would love to read this book. I am new to your site.
I would love to read this book. Thanks for the giveaway!
Interesting book with good suggestions for retirement, I think most of creating something over the internet that you can work from home. Use you knowledge that you have accumulated in all your professional years, and use that knowledge on a blog or similar.