One of the unfortunate effects of human psychology is that we often don’t take action on things that we place in the future. This includes preparing for retirement.
Too often, we lose sight of our retirement goals, and relegate retirement to some hazy future that we’ll prepare for at some other time.
The reality, though, is that you need to fight your psychology and focus on doing some things now if you want a successful retirement later. Here are 4 things to do now for a better retirement:
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1. Prioritize Your Spending — and Make Retirement Contribution a High Priority
One of the best things you can do for your financial situation, no matter the time of your life, is to prioritize your spending. Make sure you that you spend money on the most important things first. If it’s not that important, drop it off your list, and stop spending on it.
While you’re at it, make sure that retirement contributions are high on your priority list. Contribute to your retirement accounts before you do things like go out to eat or buy another video game. You’ll be glad you did.
2. Comparison Shop for Financial Products and Services
It makes sense to comparison shop if you want to save money. This applies to financial products and services as well. Look at what you’re paying for insurance, banking, and in 401(k) fees. Over your lifetime, extra fees and costs for financial products and services that you regularly pay for can add up to thousands of dollars. When you consider the lost opportunities to earn interest by investing that money, all of a sudden you could find your retirement short tens of thousands of dollars.
3. Consider Your Asset Allocation
Research indicates that the way your assets are allocated can make a big difference in the outcome when it comes to your nest egg. This means that if you want a better retirement, you need to consider your asset allocation. The younger you are, the more aggressive your allocation can be. If you are younger, putting more of your portfolio into stocks is important. As you age, you can make that shift.
While you are young, don’t underestimate the power of stocks. Consider your asset allocation and invest accordingly. One of the best ways to get the most bang for your investment allocation buck is to use index funds and ETFs. They are low-cost, easy to invest in, and help you focus more on asset class than individual securities.
4. Take Care of Your Health
Finally, don’t forget to take care of yourself right now. Good health can mean a much better retirement later on. First of all, poor health is expensive. While there is no way to completely avoid some conditions and accidents, the reality is that you are likely to have fewer costs if you take care of yourself now and into retirement.
On top of that, you will be able to enjoy yourself more when you have good health. It’s much easier to do the things you want (travel, hobbies, playing with the grandchildren) when you are in good health.
What are you doing now in order to prepare for a better retirement later?
For me prioritizing retirement savings is something that I’ve done from day one of my full-time job after college. If you start contributing right away you won’t miss the money or feel like you took a pay cut when you do start contributing.