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5 Tips for a Comfortable Retirement

Investopedia logoInvestopedia 16-11-2015 Jeffrey Rose
© Provided by Investopedia

There's nothing quite like the dream of a comfortable retirement. Sand between the toes, sipping a tall drink and watching the sunset are all images that have been conjured up when reflecting on a future retirement. But there's a problem. Many folks in their 50s, 60s and beyond can't afford a retirement so luxurious. Instead, they end up working part-time or simply continue in their full-time positions. To ensure the nightmare of having to work in your twilight years doesn't become a reality, there are a few tricks you can learn to greatly improve your chances of realizing the retirement of your dreams.

1. Earn More, Spend Less

During your working years, it's important to earn as much as possible while spending as little as possible. You know this. What you may not have thought about is where you earn and where you spend your money. If you work in a large city where the cost of living is relatively high, while you might make more money than if you lived in a small village, your spending will almost necessarily tend to match your income. That's the bad news.

The good news is that due to the wonders of the internet, you might be able to work remotely and live in an area where the cost of living is relatively low (you can make money blogging, for example). This contrast between earning more and spending less than you would otherwise increases your potential to save more money — an important ingredient for a successful retirement plan.

2. Slowly and Steadily Invest for Retirement

Let's face it, investing for retirement can seem like a daunting task. Instead of thinking you need to invest a large sum of money to see any progress, remember the wonders of compound interest over time. Even by investing $100 here and $100 there, you can slowly but almost surely see a healthy retirement portfolio assuming you have a few decades left before retirement.

Additionally, dollar-cost averaging can help promote more predictable gains by reducing unnecessary risk. Invest slowly and steadily, and you'll put to good use the power of dollar-cost averaging in your portfolio.

3. Avoid Looking at Your Portfolio too Frequently

During the first few years of investing, progress can look grim. When this happens, don't do what so many investors do and give up on investing altogether. Instead, stay the course. In fact, it's probably in your best interest to invest and not look at your portfolio too frequently. Even looking at your portfolio once per year in the beginning years may give the sense that the stock market isn't doing you any favors. While a good financial advisor can help reassure you during down markets, if you're investing on your own, you might not be able to convince yourself that these slumps are temporary. 

4. Keep Expenses in Mind

Financial planning doesn't end at retirement. Instead, it should continue. In fact, it's crunch time. While it's smart to stay busy during retirement with good friends, family and fun, many times these activities involve unnecessary spending. It's critically important to spend within your means during retirement. Again, a good financial advisor can help you determine how much you can comfortably spend every month without risking your financial security in your latter years.

5. Rethink Your Lifestyle in Retirement

While many people envision a continuation of their current lifestyle in retirement, remember that you can rethink your retirement to optimize it to fit your needs. For example, perhaps you'd like to downsize into a nicer space that requires less maintenance. Maybe you might want to move back to where you grew up and reunite with childhood friends. Just make sure that whatever you do, it's appropriate for your financial situation.

The Bottom Line

While it's no surprise that you should save as much as you possibly can, one great way of getting the most out of your retirement savings is to change your idea of what retirement should be. What you expect out of retirement at age 40 could be far different than what you want at age 65, so be ready to be flexible. 

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