Budgeting for Retirement Sooner Rather Than Later

You and your spouse have worked for decades to feed, clothe, educate, and put a roof over your family, and it has all paid off with the children off to their adult lives. You’re both now ready to retire. However, you can’t because of the mortgage on the house, the credit card debt, and the small amount of money you have stored in your savings and other accounts. In addition, the companies you work for have decided to reduce the amount of pension and health care you would receive upon retirement. The combination of your funds , Social Security, and pension don’t allow you to live a comfortable retirement. In the end, you and your spouse continue working to make ends meet.

This scenario is not uncommon in today’s economic world. According to NPR, one-third of Americans between 65 and 70 are working in their current jobs or a combination of part-time positions. For those 75 and older, seven percent are still working. Some of these people are doing it because they like to work, but a growing number of seniors are still employed in order to pay their bills. And as considerations are made to further decrease company retirement packages and increase the Social Security retirement age, this amount may increase.

This doesn’t need to happen. Young people can avoid this type of situation by planning early and sticking to a program of investment. Here are a few things to consider when budgeting for a comfortable retirement.

Pay Off Debt

We’ve said it on this blog numerous times, but it bears repeating. Keeping your debt well into retirement age can cause serious consequences for a comfortable future. Avoid this by paying off all unnecessary debt, like credit cards and student loans, as soon as possible. This allows you to free up additional funds for retirement accounts. By the way, don’t fully populate any type of retirement fund until all the debt is paid off and you have a sizable emergency fund. And when you have accomplished this …

Maximize Retirement Accounts

Be it a 401(k) or IRA, maximize the deposits to these accounts when possible. Not only does this permit the money to accrue more interest but it also allows employers to match the maximum amount they can in something like a 401(k). In addition, maximum deposits can also lower the amount of gross pay you enter on federal taxes.

Diversify

We all know the famous quote “Don’t put all your eggs in one basket.” This is definitely true when it comes to investing for your retirement. Mix it up with a combination of retirement accounts, stocks, and mutual funds. Also look to see if you can add your money into a variety of low and high risk accounts.

Sit and Wait

Don’t panic if the money in your accounts drops over the time it matures, because history shows us the funds eventually return. The only time switching to a safer series of accounts should take place is when you are close to retirement.