20 Retirement Decisions to Make Right Now

Ray LeVitre is a Certified Financial Planner and author of the book, 20 Retirement Decisions to Make Right Now and he explains some of the most important things to do now.

The 20 Retirement Decisions You Need to Make Right Now will help you prepare and reach your retirement goals.

When can you retire?
• When your assets can sustain you for the rest of your life. For example,: a 40 year old couple with $60,000 year of living expenses today could retire at age 65 if they accumulate $1.5 million (without social security) or about $850,000 (with social security).

• Visit www.javacalc.com to do a quick retirement projection to see how you are doing. Use the “Retirement Planner” calculator.

How much of your income will you need to save to reach your retirement goals?
• As a general rule you should be savings at the very least 10% of gross combined income. However, most people, especially if they started late, saving for retirement will need to ratchet this up to 15%.
• If you have a 401k retirement plan through your employer that offers matching contributions you should at the very least contribute enough to receive the match. This is essentially free money.

If you are not saving enough what can you do?
• Begin a written budget program and you’ll likely be able squeeze more savings out of your income. When you know where all your money is going you’ll be able to identify items you can go without and be able to use that money in the future to increase your savings rate.
• Increase your 401k contributions a little bit at a time. If you are savings 10% of your income now, bump up your savings by 1% each quarter. You won’t even know the money is missing from your take home income if you slowly increase your savings.
• Make your savings automatic by having money pulled from your pay check into your 401k or from your bank account into a traditional IRA or Roth IRA.
• Eliminate all consumer debt and use the payments you are currently making to increase the amount you are saving. This is a powerful strategy (see the example below). Make it a family rule that you will not have any consumer debt.

A Powerful Example:
Let’s look at an example of what can happen when loan payments are eliminated and the money is added to your investment portfolio. This is a powerful concept:

Let’s look at the money habits of two 65 year old women who started their careers in 1970 and are retiring now. Sherrie always bought newer cars, drove them for a few years, and then traded them in for nicer models. She always had a $300 per month car payment and did so for her entire 40-year career. Over the course of her career she paid a total of $144,000 in car payments. Unfortunately, Sherrie doesn’t have much to show for the $144,000 plowed into her cars.

Our other retiree, Kim, always paid cash for older cars and never made a car payment. Kim invested $300 per month into a balanced mutual fund* and continued to do so for her entire 40-year career. From 1970-2010 Kim saw her $300/month investment grow to a whopping $1,894,596. Kim’s discipline really paid off. Although she never enjoyed driving a new car Kim can look forward to a comfortable retirement. She may even buy a new car.

*Dodge & Cox Balanced Fund from 1970 – 2010

Visit www.networthadvice.com to download three free retirement chapters from the 20 Decisions You Need to Make Right Now or buy the book for $10.00, a 50% discount off the retail price. Click the TV promo button to download the chapters or use the promo code “investment” to buy the book.