5 ways to turn your retirement dreams into reality
Oct. 21-27 is National Retirement Security Week, and I’m excited that people are waking up to the importance of planning for the future.
They know the actions they take now will make or break the golden years.
Let’s be honest, though. Building wealth takes time. It’s easy to get distracted by short-term wants, like that fancy new car or fantasy vacation.
So how, exactly, do you stay focused on a long-term goal like retirement? Here’s an illustration that might help.
Some athletes use visualization as a part of their preparation for competition. They mentally rehearse hitting a shot, defending a goal, running a sprint, or swimming a lap.
And then, when the time comes, those athletes take action. They run, jump, swing, race, swim, hit, defend and win. They see the goal in their minds—and then they make it happen.
The same principle applies to your retirement savings. You need to visualize what you see yourself doing when you retire—traveling, writing, volunteering, learning, exploring, growing.
Once you have that mental picture firmly rooted in your mind, it’s time to take action. You do whatever it takes to make that dream become reality.
Whether you’re in your 20s or your 60s, you need to make a few strategic choices that will help you keep your eye on the prize.
You need to protect yourself against bad decisions and put yourself in a position to win.
Here are five things you can do:
1. Use auto draft. If you participate in your company-sponsored retirement plan —401(k) or 403(b)— you’re already using auto draft.
Money goes straight from your paycheck to your retirement fund without you seeing it in your bank account.
But that’s not the only option for auto draft. Some employers will also transfer money from your paycheck into an IRA account.
You just have to tell your payroll manager how much you want taken out of each check. If that’s not an option, work directly with a brokerage firm to schedule automatic transfers from your checking account into an IRA account.
2. Avoid lifestyle creep. It’s easy to up your standard of living as your salary increases. That’s why you don’t see seasoned lawyers living in the same dump they rented during law school.
Here’s the problem, though: If you’re not careful, your new lifestyle can outrun your budget. Yes, you want nice things for you and your family, but don’t get too carried away trying to keep up with the Joneses. They’ll still be paying for their poor money choices long after you’ve retired.
3. Limit celebration spending. I once worked with a couple who had worked hard for eight years to pay off their debt, including their home mortgage. To celebrate their accomplishment, they took out a $100,000 loan to buy a sailboat. That celebration put them right back into debt!
It’s OK to celebrate huge milestones like birthdays, anniversaries and graduations—within reason.
But that doesn’t mean you should take out a loan so your daughter can drive to college in a cool ride. She can drive an older car you bought with cash.
4. Delay Social Security. Here’s a little-known fact about receiving your Social Security benefits: You don’t have to start taking that money when you hit the full benefit age.
If you wait until age 70, you could get up to 132 percent of your Social Security benefits. Let’s say you would be eligible for $1,000 a month at age 67. If you waited until age 70, you could get up to $1,320 a month. I know you could put that extra money to good use.
5. Stay connected. Autopilot is great for transatlantic flights, but it’s horrible for investing.
You can’t just throw a bunch of money into a retirement account and let it go unmanaged and unchecked for years. You need to meet regularly with an investment professional to review your investments.
Over time, you’ll need to adjust your portfolio as the market changes and as you get closer to retirement. It’s your money, so it’s your responsibility to invest it well.
Hear me when I say it’s critical that you visualize your retirement now.
Otherwise, you won’t have a goal to chase after. That retirement dream will give you the boost you need when you’re working those extra hours and living a cash-only lifestyle.
On the flip side, don’t get so wrapped up in the dream that you forget to keep taking steps forward.
You can’t just wish yourself into a great retirement. It takes a great dream and a lot of hard work!
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