Plan for retirement

The British Queen Mother
(a very wealthy retiree),
from Wikimedia Commons

A primary financial goal for most people is to retire comfortably.  Here are a few important steps:

  1. Save money.  There’s no way around it.  To live comfortably in your golden years, you will need money.  The best way to accumulate money is to save it.  
  2. Take full advantage of your 401(k).  You should set aside at least the amount matched by your employer.  If you can set aside more, that’s even better.  The tax deferral on a 401(k) allows you to invest money that would otherwise be taxed and paid immediately to the government.  You don’t have to pay the taxes on a 401(k) until you retire.
  3. Make sure your mortgage will be paid off by your retirement date.  Whatever debts you have, you should time their pay-off so that they are gone by the time you retire.  Debt refinancing is a great tool to reduce your mortgage payments.  However, be careful that refinancing your debt does not extend payments to later in your life.  Rather, as you refinance, shorten the pay-off period for the mortgage.
  4. Diversify.  Do not keep all of your wealth in one place, be it your home, your business, a single retirement plan, your employer’s stock, or even a portfolio of stocks.  Instead, you should try to simultaneously increase wealth in all of these areas.  Build equity in your house.  At the same time, build up a nice portfolio of corporate stock, corporate bonds, and government bonds.  Let your retirement plans accumulate.
  5. Don’t count on Social Security.  As long as our generation keeps having children, and as long as Congress eventually restores the higher employment tax, then more money will probably pour into Social Security, and there will be some money there for us to retire on.  However, don’t count on it.  
  6. Always be prepared for the worst.  Whatever you do, don’t let your insurance plans expire unless you are prepared to shell out for whatever disaster could come.  Are you financially ready for a medical catastrophe or a natural disaster?  If not, make sure you have the insurance to cover it.
That said, don’t wait until your twilight years to enjoy life.  Enjoy it now.  

About Mark P. Holtzman

Chair of Accounting Department at Seton Hall University. PhD from The University of Texas at Austin. Worked at Deloitte's New York Office. BSBA from Hofstra University.

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