Retirement Planning Tips

Follow these extra retirement planning tips to live simply and frugally in the years before retirement, as well as during retirement.

By following these planning tips and managing your money well before time to retire, you will find it easier to save, and easier to transition from career to retirement.

Retirement is not your life's goal, but it is a time of life that you need to prepare for.

Being mindful of how you use your money will make it easier to build wealth and be prepared for retirement as you enjoy life along the way.


Summary of Financial Planning Tips

Topics of this page

  • Get in the habit of saving for retirement even if it starts small, then increase when possible
  • Avoid getting into debt and resist the urge to have it all now
  • Buy slightly used cars and drive them for 10 or more years
  • Don't buy more house than you need just to appear affluent.
  • Keep your mortgage easy to manage and pay extra payments or more than the required monthly payment when possible

Retirement Planning Tips - 1 Establish A Savings Habit

As soon as you are working full time and living on your own, get started on your savings habit.

Establish an automatic savings contribution through your employer's 401k plan or schedule an automatic deposit from each paycheck to an IRA account.

Most large employers offer this option in addition to direct deposit. If you employer doesn't offer it, you can set up an automatic transfer through your bank account.

Retirement Planning Tips - 2
Avoid Debt and Live Within Your Means

credit cards

The biggest problem many people have is high debt. Once you build up significant debt you don't really remember what got you there.

The things you bought just fade into the background of life, but the debt burden takes a chunk of your income for a very long time.

Typically people spend money with credit cards on things like clothes, travel, vacations, and eating out, as well as the occasional “toy” such as electronics or sporting equipment.

Instead of creating debt using credit cards for these things, try to get into the habit of using a budget and setting aside money ahead of time so that you can pay cash when you need new clothes, a date night, or a new toy.

Live by your budget and reward yourself when you are able to save money. If you make it a game or a challenge, this lifestyle can be quite rewarding. And if you budget well, it will be easy to do and you will actually feel more prosperous when you're able to say you don't have debt.

If you have credit card debt, check out this 4 part series on credit card debt for tips on getting on top of it.

Retirement Planning Tips - 3
Buy Used Cars and Drive Them for Many Years

To get the most for your money, buy a slightly used car with low mileage. By doing this you can usually get more features than you would get buying a new car. Choose privately owned cars over program cars which would have been rentals or used by many different people.

If you really want to treat yourself to a new car, at least buy it at the end of the model year when the new models are coming out and the previous models are on sale. This can save you between $5-$10,000. You can save more money by shopping for lower promotional interest rates, even zero percent in some cases.

Another tip for making the most of your money is to sell your old car yourself rather than trading it in with the dealer. This is a little more work, but can be worth a couple thousand dollars difference.

The next financial planning tip to put into practice is to perform regular maintenance and drive your cars for 10 years or more. This gives you 5 years of car payments to put into your bank account if you typically finance your car purchases. Once the loan is paid off, continue making payments to your savings account towards your next car purchase at the end of the 10 or more years.

Retirement Planning Tips - 4
Don't Buy More House Than You Need

During my career I saw many of my peers buying huge houses just so they could look rich to other people. This is the epitome of the “keeping up with the Joneses” trap. Resist this urge to compete with others. Choose your home according to your family and lifestyle needs. If you buy more house than you need, you'll have higher costs to furnish it and higher maintenance expenses.

If you have six months of living expenses in your savings account, and have fully funded your retirement plan, and you have plenty of extra income and NO DEBT, then you can buy that big fancy house. If not, buy what fits your needs and budget.

Retirement Planning Tips - 5
Keep Your Mortgage Manageable

One way to keep your mortgage manageable is to follow Tip 10. After that, keeping the mortgage payment low is also important.

If you decide to refinance your mortgage for a better rate, think carefully before you opt for the shorter term. If you've had your mortgage for 10 years or more, then of course you should choose the 15 or 20 year term. If not, it may be smart to keep the term at 30 years but pay extra each month to pay it off early.

For example, if you refinance to get a lower interest rate and your payments are lower, continue paying the same amount you paid on the old mortgage. If possible, pay even more to pay down the mortgage even further.

Then, if something happens and your budget gets tight you have the option of paying just the amount due without the extra.

Your home is probably the largest expense in your budget. Having it paid off before you retire should be your goal.

Try to have it paid off as soon as possible and before your target retirement date.

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