How to Prepare for Retirement

I want to ask you something. Do you want to work forever?

Do you imagine a time when you will spend your days walking hand in hand with your sweetheart upon pebbly beaches? Or do you dream about filling your home full of children with eyes like yours who happily waive goodbye to their parents as your children and in-laws trot off to work? Would you like to throw a dart at a map and plan to spend the six months of your life under the dart’s tip? Do you long for the day when your can spend all of your time volunteering and making a difference in the lives of others? Would you like to be the master scheduler of every minute of your day?

That’s retirement. Experts estimate that it will comprise up to a third or more of your life. According to, a person retiring today who earns $50k will need close to one million dollars to retire while retaining their current standard of living. If the same person plans to retire in forty years, they will need a little less than three million dollars factoring in 3% inflation. Needless to say, retirement requires planning.

Here’s a general strategy to help you plan for retirement.

1. Capture your 401k match. This is money your employer gives you when you contribute to your work-sponsored retirement plan. Do your best to take advantage of this.

2. Start a Roth IRA and max it out. A Roth IRA is an account that allows account holders to invest a sum of up to $5000 and make tax-free withdraws at the age of age of 59 and a half. With a Roth IRA you can turn your spare change into millions of dollars.

3. Develop good personal finance habits.
a. Start an emergency fund, take care of your health and consider your insurance needs. According to Elizabeth Warren, a Harvard law professor specializing in bankruptcy law, unexpected emergencies, especially health related emergencies are the number one cause of bankruptcy in the United States. These emergencies have the power to derail any and all savings, including retirement accounts. Plan accordingly and do your best to protect yourself.
b. Track monthly expenses-fixed expenses. Write down everything you spend. This will help you better plan for the future.
c. Free yourself from silly fees. Consider paying bills online to avoid late fees. Look into free account services.
d. Save separately for side projects. You may choose to buy a home, start a business, finance your, your spouse’s or your children’s education or purchase technology that helps you to become more efficient, productive, healthier or safer. None of these things should derail your retirement planning efforts.

4. Pay off debt and set up an automatic investing plan. One key to retirement planning is to minimize fixed expenses and create ways to live on less. The best way to do this is to eliminate interest payments on debt. Another method involves artificially restricting your income through automatic savings which forces you to adjust your lifestyle so that you have to live on less. This method was popularized by David Bach’s Automatic Millionaire.

5. Look into stock market or index fund investing. There are good reasons not to max out your 401k or other non-Roth retirement accounts. Current legislation allows long term investments to be taxed at a reduced rate. These long term investments also do not carry penalties upon earlier than planned withdraw.

6. Consider purchasing an annuity if you feel that you are running out of time. An annuity is an insurance plan that pays you a preplanned sum every month for the rest of your life. Annuities can be very expensive investments which require a great deal of research and may not be as effective at meeting your needs as your own foresight and planning. Weight the costs and benefits before purchasing one of these plans.