We live in uncertain times today. To be sure, the old rules that used tell you how to retire in comfort, no longer really apply. The basic rules of how life is to be lived now, have changed. No longer is it okay to live happily today and save only a little. The mantra today to enable a comfortable retirement, is all about saving as much as you possibly can, and then cutting down on everything you can do without. Not only can you no longer not live above your means, the experts ask you to live below them. First, this lets you save more. And then, learning a low demand lifestyle helps you make the money you save last longer, once you retire. The more you get used to a lower level of living, the better your money will last you in retirement. Let us try to understand some of the new rules of thumb that tell you how to retire in reasonable comfort.
If you are looking online for investing advice, you can quickly get confused and frustrated. There are just too many sources out there, and you never know what is good advice and what is just garbage. The problem is that there are a lot of people out there who think they know what they are talking about when in reality they know very little. That doesn’t stop them from talking though. There are also many great pieces of investing advice, but what works for one person will not work for someone else.
You’ve always been told that you needed to save 10% of your income for retirement. Those rules are changing somewhat. Today, the rule of thumb is that you should save 20% of your income. And that’s the lowball figure. You should save this, and more, if you possibly can make the sacrifice. What you need to plan for in retirement is an income level that reaches 85% of what you used to make while you worked. That 85% would include your Social Security, your pensions, and of course, income from your savings. With the way investments crashed over the past three years, you’re certainly going to need to be more cautious with where you invest. A more cautious investment plan will of course mean lower returns. And this is something you have to prepare for.
If you don’t have a lot of time to dig through all of the investing advice that you find online, you might have to go talk to a real person. That might be the best way to go anyway. Investing advice that is tailored to your unique financial situation is the best way to go. Everyone has different dreams and different needs, and you can’t fit that into what you find online. You may notice that nothing you find seems to work for you, and this is when you get overly frustrated.
This is about the right time to switch to a Roth. What you want is the freedom to withdraw money from whichever account of yours seems to have made the greatest after-tax income for you. Investing in a Roth alongside of other traditional investment destinations, you give yourself the freedom of withdrawling from whichever account pleases you.
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