Smart401k Blog

This is the time of year when many take their summer vacation.  As I start to plan mine for later this month, I am reminded by a stat I’ve heard a few times over the years: many Americans spend more time planning their vacation each year than they do planning for retirement.  

I suppose a main reason why this might be true is that vacations are a near-term event, and therefore seem more important at the time.  I think most realize, however, that even though retirement may be far in the distance, it is perhaps the most important thing you can plan for.  A vacation may last 2 weeks, while retirement could last 30 years.

Below are a few steps that I would recommend taking to make sure you are on track to reach your retirement goals:

Devote at least one day each year planning for your retirement.  Treat this day like a birthday or anniversary to make sure you are consistently allocating time to this effort.  Doing so will avoid the temptation to keep putting the task off.

Establish a formal plan and put it in writing.  Be as specific as possible and put your plan in writing.  At a minimum, a written plan should include:

• Years to retirement – Use one of our calculators to help define this timeframe. Your timeframe will be based on your current savings as well as your future contributions.
• Current savings – List all investments that can be used for retirement. This is essentially the “pulse” of your retirement plan and should be monitored each year to track your progress.
• Contribution amount – Determine how much you’ll need to put away each year.
• Investment strategy – Indicate which investments you will use and the percentages for each.
• Social Security/pension estimates – Include any other income you can expect to receive during retirement.

Put your plan in action.  Once you feel comfortable that you have a suitable and comprehensive solution for how to get to retirement and beyond, make sure you take the necessary steps to implement the plan.  This could be as simple as setting your contribution amount and making some adjustments to your investments, or it could be somewhat more complex with multiple steps.  For example, you may decide you need to reduce debt or increase your emergency fund as part of your long-term retirement strategy.

Review and update your plan.  Markets are uncertain as is life, so you can expect to make some adjustments along the way.  An annual checkup will ensure that your plan is adapting to changes in your situation and market environment, and give you a better chance for a secure retirement. 

Sure it may not be as fun as planning your next trip, but I bet that when you’re enjoying your retirement “vacation” you’ll look back and thank yourself for taking the time to plan for the future. 

Kevin Jaegers, Senior Investment Advisor

This entry was posted on Tuesday, August 4th, 2009 at 6:21 pm and is filed under Uncategorized. You can follow any responses to this entry through the RSS 2.0 feed. Both comments and pings are currently closed.