Although retirement is more than a decade off for me, I have been reading some books about how to prepare for it.
One of the books was The Retirement Catch-Up Guide by Ellen Hoffman. The book has 54 real-life lessons about how to boost your future resources now.
- Make a list of every job you have ever had. Then try to remember if there were any retirement benefits from that job.
- Go through all financial papers and put them together.
- Look at the Pension Benefit Guaranty Corporation to see if your name is on the list. They have about 10,000 people whose pensions they were prepared to distribute - if the agency could find them. (I checked this...no unclaimed pensions for our family, my parents, or grandparents.)
- Invest in an IRA each year. Use the same account so you're not assessed multiple fees and have to deal with a lot of paperwork.
- You may have to get another job - even if it is later in life. Identify personal accomplishments on which you can build your future. Look decade by decade.
- Calculate all your expenses and income. See forms on http://www.kiplinger.com/spend.
- Institute a plan to reduce spending. Two places to get ideas: http://www.stretcher.com and http://www.slnet.com .
The other book I read was The Everything Investing in Your 20s and 30s by Joe Duarte. This is more for Sophia and Olivia (even though they aren't that old yet), and helping them with laying a strong financial foundation.
There were some helpful ideas mentioned in this book too:
- Pay off as much debt as possible before you start investing. Debt is a drag on yoru ability to save. Think of debt as a big sack of potatoes that you carry on your back everywhere you go. By paying debt, you are taking that big weight off of your financial shoulders. Being lighter makes you move faster.
- Achieving diversification. Diversification requires thought and an understanding of the purpose of your portfolio.
=> Be clear when setting your investment goals. Consider your time frame, your risk tolerance, and purpose of your portfolio (e.g., long-term growth for retirement, current income, or both)
=> Choose quality over quantity. Pick one fund at a time.
=> Keep it simple. When you've chosen a fund that meets your criteria, don't add a similar fund.
- Consult a good financial planner to help you put together, monitor, and adjust your long-term financial plan.
- Get a grip on your taxes. Meet with and use a CPA.
- Protect your life, your home, and your future.
- Invest in a 529 Plan. When college arrives, you can use the money you've saved over the years to pay for qualified higher education costs (e.g., fees, books).
- Invest in an IRA early on - even if you are working part time.
- Roth IRAs - you pay the taxes on the contributions as you add the money to the account so you don't pay taxes when you make withdrawals.