Hardly anyone in their twenties thinks about retirement, much less plans for it. Who has time to plan for something that’s forty or fifty years away (especially if bills or student loans are due right now?) Retirement could hardly feel more remote, but this feeling is an illusion. Delaying retirement planning forces you to play catch-up later in life, making painful sacrifices in your thirties and forties that can be totally avoided with a little foresight today.
Run Some Numbers
Write this down: there is no such thing as “retirement.” Not in the abstract. In order for you to retire and support yourself from savings, you will need a specific amount of money. Unless you save on a fairly set-in-stone schedule (the same amount every month until retirement age) you wont have it. Sorry to be so bleak, but unless you plan on winning the lottery, it’s quite true. Sticking your head in the sand and trusting that it’ll all work out is not a strategy.
You can’t get too specific, of course – no one in their twenties knows exactly what lifestyle they’ll want fifty years from now or how much it will cost. But you can make intelligent projections. MSN Money’s retirement calculator asks you for relevant numbers (planned retirement age, target yearly income, how many years you expect retirement to last) and tells you whether you’re saving enough. Save what it tells you to and you’ll be in much better shape.
Your Desired Retirement Lifestyle
These calculations are a starting point, not the end. Now it’s time to think long and hard about the kind of retirement lifestyle you might want. Again: it’s impossible to nail this with pinpoint accuracy at 24 years old. The point is simply to begin thinking about these important questions so they don’t sneak up on you later:
- Where in the country will you want to live?
- What will your hobbies include?
- Will you want to travel or just enjoy simple “around the house” leisure?
- Will you own your home? Will it be paid off before or after retirement age?
All of these things are interrelated. By keeping them in mind, you will always be analyzing how different retirement scenarios and opportunities could affect your preferences in those areas.
Consider Your Career
With your preferred retirement lifestyle in mind, consider your career. Your income is probably the biggest factor in retirement planning. It dictates how much you can save, how frequently you can save it and how quickly you can reach your goal. Do you earn enough money to get there? If you don’t currently make enough, will you? How? When?
Remember: denial isn’t a strategy. Retirement planning is all a numbers game, and if the numbers don’t add up, you’re only fooling yourself. Unthinkable as it may seem right now, your current career might be a poor match for your retirement goals. If you truly want the retirement lifestyle in your head, your income needs to support it. Two choices remain if it doesn’t: change your career or change your retirement goals. Changing your career is never a breeze, but it’ll never be easier than it is now.
Revise The Plan Over Time
As you get older, your goals, priorities and preferences are bound to change. The wild, travel-heavy retirement you thought you wanted as a 25 year old may seem excessive by the time you’re 35. Or, the tame, hobby-centric retirement you wanted might seem boring by that age. The point is, you are unlikely to move from your twenties to your sixties with the exact same retirement goals.
Be mindful of your changing preferences and adjust your actions accordingly. If a new wrinkle in your plan calls for more money, start saving more. If it calls for less, start saving less (although it’s always smart to save a little more than you anticipate needing.)
Would a ship’s captain point the boat toward home, assume all was well and fall asleep at the wheel? Of course not. Any number of changes (rocks, storms, choppy waters) could ruin the original plan. Until the captain reacts and changes course, the boat just drifts further and further away.
The same is true of retirement planning. Although we encourage you to automate 401(k) or IRA savings, don’t take a total set-it-and-forget-it approach. Make a point of looking at your accounts and comparing them to your overall plans. If things don’t look right, investigate what’s going on and make the needed changes. Forewarned is forearmed.
Seek Help If Necessary
Retirement planning isn’t rocket science, but if you’re a busy professional, it might feel that way. Not everyone has time to devise, implement and diligently execute a comprehensive retirement plan. It doesn’t mean your ignorant or lazy – just busy. Luckily for you, there are professional retirement planners whose job it is to help people in your predicament.
Schedule an appointment with one as soon as you realize you’re in over your head. Your retirement planner will clearly lay out your options, help you establish goals and (with your help) put together a specific road map for getting there. Then, your job will simply be to follow it.
Colin Anderson is a freelance writer for Noomii which is an online directory for coaches where people can find coaches in various cities such as a life coach in Houston. Colin lives in Houston, Texas with his wife and 4 children.