Your personal checklist
Your personal checklist:
In the old days, before retirement investing became such an individual challenge, most companies offered pension plans. It was a fairly simple concept. In exchange for years of service, the company promised its employees a certain regular monetary benefit when they retired. The company would then set aside money periodically into a pension fund. That fund paid out current retirement obligations. The basic idea has been around in one form or another for generations.
These days, reaching your financial goals for retirement depends almost entirely on the savings and investment decisions you make today. The process can be planned. By sticking to that plan, you lay the foundation of a financially independent future.
The details of your financial situation may be unique. And priorities must be adjusted for your age, income, education and family status. But the beauty of successful retirement investing is that, for most people, the basic plan is the same. In fact, there are really only seven fundamental steps that a person needs to follow on the path to a financially independent retirement.
Are you on the right path?
Check these seven steps along the path to successful retirement investing to see how many “Yes” answers you can check.
- I participate in my employer’s retirement plan.
Do not hesitate. Starting early is the key to making it easier to achieve your retirement goals. Employer plans make it easy to participate and you can learn as you go.
- I take full advantage of any employer plan match.
This is really very simple. The more you put in, the more they put in. Give (to yourself) until it hurts. It’s as close to a guaranteed return on investment as you can get.
- I save as much as I can on a pretax basis.
Money you put in your employer-sponsored retirement plan comes out of your paycheck before taxes are taken out. That means from day one it is worth more in your retirement account than in your pocket.
- I invest for the long term.
Think long term when you invest for retirement. Mix up your investments among assets. Asset diversification means varying your investments among the asset classes of stocks, bonds and cash equivalents.
- My portfolio is diversified within stock holdings.
Diversifying within stocks means taking your stock holdings and further dividing them up. By diversifying your assets across a variety of investments, you can minimize the effects of market ups and downs on your overall portfolio.
- I avoid frequent trades.
It’s next to impossible to predict the market’s next move. Have a reasonable strategy and stick with it.
- I let my investments grow.
At times, it can be tempting to borrow or withdraw a portion of your money and take your lumps. But taxes and penalties are only part of the cost. The real damage is done over time as you lose the compounded interest of that money. There are plenty of other less costly ways to address short-term financial needs.
Financial independence isn’t a hazy vision in the distant future that may happen if you’re lucky. It is a condition that actually exists as long as you are working to achieve that future.
