5 Things You Can Do To Prepare For Retirement & Giveaway

Rick Rodgers, CFP®, is President of Rodgers & Associates in Lancaster, PA and author of The New Three-Legged Stool: A Tax Efficient Approach To Retirement.  He can be reached at rick@rodgers-associates.com.

Planning for retirement is like running a marathon. You should set a steady pace and then keep going. You don’t want to reach age 60 to discover that you can’t retire in five years because you didn’t save enough. You should have a strategy in place to reach you goal and do something each year that moves you closer to realizing it. Here are five things you can do this year to help you reach your retirement goals.

Review your Social Security Statement – Everyone that has paid into the Social Security system and is not drawing benefits should be receiving an annual statement. Many people barely take notice of the statement other than to note what their monthly check will be at retirement. This is useful information but what you should pay attention to is the record of earnings. Check that your earnings are being recorded correctly. Your monthly benefit is based on your earnings history. It is a lot easier to get this fixed if you do it right away. You will be required to show proof of earnings and Social Security taxes paid. Most people can produce this easily for the last couple years. Going back 10 years is a lot harder. Review your statement today and make sure you are getting credit for the money you’ve been putting into the system.

Prepare a Budget – You need a plan to control spending and the best way to plan is by using a budget. A budget does not tell you what you can and cannot spend money on. You make those decisions. The goal should be to spend less than you earn. Prioritize your savings so that you are saving something out of every paycheck. Developing this habit early on will help you reach your financial goals sooner. Shoot for a minimum savings of 10% each paycheck. Try to increase the percentage every time you get a raise. The more you control spending the more you will save and the sooner you will be able to retire.

Maximize your 401(k) Match – Many employers will match a percentage of the contributions their employees put into the company 401(k) plan. You should contribute at least as much as the employer will match. If your employer matches a certain percentage dollar for dollar, that’s a 100% return on your investment from day one. On top of the employer match, you get tax benefits to boot.

Make a Roth Contribution – You don’t want all of your retirement savings to be in 401(k) plan when you retire. If you did, every dollar you try to spend in retirement would be taxable. Some of your savings should be accumulated in a Roth IRA where the IRA withdrawals will be tax-free. You can contribute up to $5,000 in 2010 if you have at least that much in earned income ($6,000 if you are age 50 or older). Those with incomes over $105,000 ($167,000 for joint filers) cannot make a Roth IRA contribution directly. They can make a non-deductible IRA contribution and then convert it to a Roth.

Get Out of Debt – I know this probably doesn’t sound like it will help with retirement but it will. The truth is you are probably in debt because you haven’t learned to control your spending. Just making the decision to get out of debt will subconsciously help you reduce spending which will ultimately lead to increased savings. Besides, you don’t want to go into retirement and still be making debt payments. The first step is to make the commitment to no more borrowing. Then list all your outstanding debts from the largest to the smallest. Concentrate additional debit payments on the smallest debt first. After one is paid off, roll those payments into the next smallest debt and keep going until you are debt free.

We’ve all heard that the best way to eat an elephant is one bite at a time. Many people think that retirement planning is too big of an elephant to tackle. But it doesn’t have to be. Take small steps, do something year after year and watch your savings and investments grow. It won’t be long until you’ll be able to look back and see that it wasn’t that tough after all.

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Giveaway Details

We’re giving away one copy of Rick’s book, The New Three-Legged Stool: A Tax Efficient Approach To Retirement. It has awesome explanations of the retirement options plus amazing examples that help illustrate the important points.

This is a simple contest. You can earn an entry in only one way:

Comment below with 1 way that you’ve improved your retirement outlook sine January 1st.

Entries close April 24th.

I’ll use random.org to select a winner, whom I will contact by email.

*Disclosure: Mr. Rodgers provided me with free book and has graciously agreed to send the winner a copy as well.

15 Responses to 5 Things You Can Do To Prepare For Retirement & Giveaway

  1. Zach @College for 10k says:

    I’ve been putting $50 a month into my Roth IRA. Not much, but every little bit helps!

  2. Mrs. Frugal says:

    We re-directed my husband’s raise into his 401K.

  3. Joe Plemon says:

    Good advice. I like the one bite at time analogy. I would also emphasize your advice of increasing your savings with each pay raise. A great goal would be to dedicate half of each pay raise toward saving/retirement.

    I am retired and I promise your readers: those years will fly by quicker than you think. “Tomorrow” is today! Get started following Daniel’s advice. You won’t be sorry.

    • Daniel says:

      @Joe Plemon, Not my advice, but I’m glad I got a guest poster who provides good advice! I’m about halfway done with the book, and I’ve learned a ton plus read some really cool stories about people who make some uninformed decisions that cost them a TON of money.

  4. These are all good points, but the one that resonates with me is debt elimination before retirement.

    My husband and I will be debt-free (including the house) before retirement. We see our parents retire with debt (and add more) in their seventies and can’t understand their thinking. One had to get a reverse mortgage to make ends meet yet bought a used motor home with $500/month payments.

  5. CJ Bowker says:

    Sounds like a good book and I always like a good read. Let’s see I’ve contributed to my retirement accounts and paid down debt. I haven’t really reviewed my social security statement though. I’ll bet a lot of people don’t do that. It’s on my list of things to do this weekend. Thanks.

  6. The best things I’ve done for my retirement this year is review and update my insurance coverages. That’s what allows me to really put money away for later. My family and I will be okay whether I get there or not.

  7. Norman says:

    I’m 52 and made a major decision last month to totally pay off my mortgage by the end of next year. I’m debt-free except for the mortgage. It is requiring a strict budget but I think in the long-run it will be worth it. I took a chunk of money from savings to pay it down some. I figure that even after the tax effect, I’ve made a better return by paying on the mortgage than I can with the same amount in a savings account. After the end of next year, I will put all my focus on saving for retirement during the few years I have left in the work-force.

  8. Jennifer says:

    Put $350 into saving and then into CDs every pay period, as my husband’s employer no longer matches 401k contributions. Also funded the 2009 Roth IRAs.

  9. Jesse says:

    The first thing I have done is start saving. The savings is not in a special retirement account yet but it’s heading that way and building quite nicely.

  10. Robert says:

    This sounds like a book that everyone should read

  11. Adriana says:

    I am attending Dave Ramsey’s seminars at tour church to learn how to best maximize our income. We automatically invest $250 every month towards retirement. We are already debt free (except for the house payments).

    Thanks for the opportunity to win your book.

  12. One way I’ve improved my retirement outlook is through The Yakezie and writing. I never really could have imagined that starting a group of bloggers and writing could be so potentially lucrative.

    I firmly believe that if we all stick with it for years, especially with the new initiative coming out, we may never need to worry about retirement again!

    Sam

  13. Daniel says:

    Congratulations to Bucksome Boomer on winning the giveaway!

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