To get where you want to be, on a timeframe that works for you, it can be useful to break the steps down and draw a roadmap. Here is a four-part plan you can use to get more serious about saving for retirement, whether you’re in your 40s, 50s or 60s.
1. Imagine your wants and needs in retirement
Do you picture yourself at a quiet cabin on a northern lake? Or living a snowbird life, split between golf and grandkids? Retirement plans look different for everyone. Spend some time assessing what you want from your golden years. Some people downsize while others stay in their current home. Some people continue to work on a part-time or contract basis, while others go all-in on travel or other hobbies.
2. Take stock of where you’re at today
As a picture of your retirement starts to form in your mind, you may find this helps motivate you to sit down and assess your day-to-day spending. Consider tracking your income and expenses over the course of a month, to see where your money is going and whether you have room in your budget to start (or increase) making contributions towards this goal.
3. Understand your attitude toward investing
Now that you’re committed to starting or growing your retirement fund, it’s important to understand your own risk tolerance and risk capacity. Your timeline is also an important factor to consider. If you’re in your 40s and your target retirement date is still more than 15 years away, you have a much longer time to invest than someone in their 60s who is hoping to slow down in the next five years or so.
If you have a longer time to invest: If your retirement is still 15 years away, you might consider higher-risk investments. This is because you’ll have more time to make up for any potential losses along the way. Over time, markets generally recover from losses, which can offer peace of mind if there are bumps along the way.
If you have a shorter time to invest: If your retirement is less than 15 years away, you may decide to opt for stability: lower-risk investment options. Once you get to a point where you plan to start using your savings soon, you may not be able to afford to see any significant drops in your investments—even if your investment style has been more high-risk until now.
4. Be intentional
If you feel like you’ve fallen behind on saving for retirement, you may be feeling stressed about playing catch-up. An advisor can offer financial recommendations based on your investment needs. There are ways to help get on track once you’ve decided this is the time to make retirement a priority investment.
The bottom line
Even if you’re starting late on saving for retirement, at least you’re starting now. You don’t have to feel like you’re behind forever. Taking concrete steps in your 40s, 50s and 60s can help you regain a sense of control over this next phase of your life. Together with a professional advisor, you can build a solid retirement plan that you’re motivated to save for in the coming years.
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Courtesy of The Royal Bank of Canada
