Retirement Planning: Much Better Than a Poke in the Eye

How are your retirement savings coming? I know, that’s probably not the most pressing thing on your mind right now, especially if you are in your twenties or thirties. Or if, you know, you have pretty much anything else to do.

But, that doesn’t mean it’s not important. So take 5 minutes out of your day right now to give it a little thought. Future you will thank you.

Let’s start with some basic questions.

1. Have you started saving for retirement?

If yes, skip to question 2.

If no, read the next paragraph and take action now.

Start now. Really. If you’re eligible for a 401k call up HR and get the forms you need, because you can afford to contribute to your 401k. If you’re not eligible for a 401k, go online (hey, you’re already there) and open a retirement account at someplace like Vanguard. They can almost certainly help you out with what kind. And yes, I know you may not know what to invest in, etc. But START sending some money on a regular basis in anyway — leave it in cash if you must at first — and you’ll have the first step taken care of.

2. Are you saving enough for retirement?

If yes, that’s awesome. Pat yourself on the back and move on to something else.

If no, go increase your contribution amount by at least 1%, and more if you can. Then put a note in your calendar to do it again in six months.

If you’re not sure, join the club. It’s really, really hard to predict the future. But this is a good time to review what you’ve got so far, what you hope to do in retirement, and how your projections have worked out so far. Check out how much do you need to save for retirement for some excellent points & links to various calculators.

3. Are you getting close to retirement?

If yes, make sure you’ve got all your ducks in a row. Check with Social Security about any benefits you may receive, and with the IRS about any possible Required Minimum Distributions you may need to take.

If no, keep plugging away.

And of course, if you’re already retired, feel free to a comment describing what it’s like.

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13 comments

  • Great post! I agree that it is never too early to start thinking about your retirement situation. I believe in his book, Cameron Johnson said he started contributing to his retirement at the age of 10 lol

  • I really wish more readers who have already retired shared their opinions. It could be so great to know their thoughts about the ways they were saving (or not) and how their life changed financially after that. I can only relate to my grandaprents but could be nice to know more.

  • I’m in my 20’s and definitely saving. I’d even venture to say I might be saving too much according to most but I can afford to and it will help me get ahead :) Thanks for the reminder though, many are not and some people are even missing out on their 100% return on investment guarantee (matching in their employer’s 401k if they have it)

  • My wife and I both max out our Roth IRAs, and we’re looking to set up a SEP IRA in the next year. Outside of these accounts, we’re also accumulating index funds. This allows us to hold a diversified position in the stock market that we won’t ever have to sell (thus incurring capital gain taxes), and we can just collect the dividends every quarter (although we have to pay taxes on those). In due time, if we accumulate enough, we can just live off of those taxable dividends (which tend to consistently rise faster than inflation on an annual basis).

    • Accumulating enough that you can live off dividends sounds like an excellent plan to me! (And is fairly similar to my own…)

  • Other than my 401(k) match I haven’t done much this year in terms of saving for retirement. Hopefully I’ll get my ROTH IRA matched before April 2013!

  • If someone is beyond their mid-20’s and hasn’t answered an emphatic “Yes” to question #1, it’s time to get things in gear ASAP!

    The thing is, even many people that are saving are just not doing enough. I think that what’s considered a normal lifestyle just doesn’t all for enough retirement savings. Time for many folks to run the numbers and get realitic, because reality can be sobering. Best to operate with the best information and go from there!

    • I agree; it’s a rare person who’s actually saving too much for retirement, so chances are we could all stand to increase our retirement contributions.