Introduction

The landscape of retirement is changing, with members of the baby boomer generation enjoying a longer lifespan than previous generations. Their longevity, however, often equates to a more lengthy career, as many retirees simply do not have enough money saved to maintain their lifestyle. Combine that with young professionals, saddled with student loan debt, putting retirement savings off until the future, and it’s easy to see why so many Americans are stressed out about retirement.

The good news is there's still time, and there are many ways you can cut back on your current spending if you are ready to retire but don't have as much in savings as you would like. Whether you’re just starting your career, or you are planning to retire within the next few months, this guide will help you figure out the best ways to save, invest and plan for retirement.

Who it’s for

While this guide will be useful for anyone concerned with having enough money for retirement, I particularly wrote this guide for:

Methodology

To get a well-rounded view of current retirement advice, I consulted five experts with a wide range of experience and viewpoints to give you a breakdown of the different opinions and options available to you, no matter where you are in your retirement planning.

To find out more about what those nearing retirement should expect in a post-recession economy, I spoke with Walter Updegrave, who is the author of four investment books including We’re Not in Kansas Anymore: How to Retire Rich in a Totally Changed World (Crown Business 2004) as well as the former editor and writer for MONEY Magazine, former “Ask the Expert” columnist for CNNMoney.com and current editor of RealDealRetirement.com.

To learn about how people can plan for an early retirement, I spoke with Wes Moss, host of the popular radio show “Money Matters” and author of the best-selling book You Can Retire Sooner Than You Think (McGraw Hill 2014).

I was interested to find out how millennials should be preparing for retirement, so I spoke with Sophia Bera, author of the e-book What You Should Have Learned About Money, but Never Did: A Gen Y Guide to Empowered Finance and founder of Gen Y Planning, which is an investment firm dedicated to serving millennials.

Finally, to find out more about what those nearing retirement age or in retirement can do to maintain an income stream, I spoke with Nancy Collamer, author of Second-Act Careers: 50+ Ways to Profit From Your Passions During Semi-Retirement (Ten Speed Press 2013), speaker, lifestyle coach and editor of MyLifestyleCareer.com.

In addition to speaking with retirement experts with a range of expertise, I consulted with over 20 publications, including The Five Years Before You Retire: Retirement Planning When You Need it Most by Emily Guy Birken (Adams Media 2014).

Planning for retirement

It’s a question everyone should be asking themselves, from twenty-somethings to people nearing retirement age. How much do I need to retire? While some experts will give you a straight number to shoot for (generally around $1 million), others say that focusing on one number is bad advice that can destroy your finances by distracting you from the larger picture of deciding how much money you need to retire based on how you will be spending your retirement. This guide will break down the advice for you so you can figure out the best way to meet your retirement goal.

When to start
Ideally, you will begin planning for retirement from the moment you begin working: “There’s no substitute for getting an early start on saving,” says Updegrave. A lot of financial advice recommends budgeting as the beginning point of retirement savings, however one problem with budgeting is that “too many people budget first and save whatever’s left over,” Updegrave says.

Instead of budgeting, young professionals should prioritize savings in a way that makes sense to them: “The first thing you should do is save,” Updegrave says. Whether you save 10 percent, 15 percent, or another amount that makes sense to you, put your savings in a 401(k) or mutual fund. “Take it right off the top,” says Updegrave, so you can force yourself to live on less than the amount of income you actually make.

While this is sound advice for people at any age and career level, starting your career with this mindset will make it easy to adjust to a certain standard of living. It will be significantly more difficult to try this later in your career when you effectively give yourself a pay cut by putting more cash into savings every month.

Updegrave advises people to think of retirement as “a living bill you have in the future,” one for which you are simply putting money aside to pay later. This can be a great way for you to make saving for retirement a priority rather than an afterthought. “The biggest thing is to start,” adds Bera. Once you get started by opening a Roth IRA or 401(k) and set up your monthly contributions, your money will start adding up.

Savings versus investments

A successful retirement plan will include both savings and investments. Here’s a breakdown of why each of these retirement vehicles matters and how you should use them as you advance through your career years:

Savings
Savings are lower-risk than investments and can be thought of as cash equivalent vehicles including money market accounts, CDs and savings accounts. While you want to have some money set aside in savings, these are not avenues that will, in the long run, make you a lot of money. That’s why it’s important to combine savings with investments to build your nest egg and have enough cash in the bank when you’re finally ready to retire.

Investments
Investments are higher risk than savings vehicles, although the amount of risk they pose depends on the type of investment. Generally, people will make riskier investments early in their careers, then move their money to lower-risk investments as their career advances and they start thinking more and more about retirement.

Stocks are the most common and popular form of investments, and in general they should make up part of your retirement portfolio. Updegrave stresses that investments are riskier for the potential for a higher return--a high return isn’t guaranteed, which is why you do not want to put all of your money in high-risk investments.

Can I catch up if I didn't put enough away when I was younger?

There are a lot of reasons people put off saving for retirement. Going to graduate school, working minimum wage jobs and/or jobs without a company 401(k) option, taking time off from the workforce to take care of kids or aging parents or just simply not thinking about it are all common reasons people neglect to save for retirement. If you fall into this category, the bad news is that you can’t recoup all the money you lost by not saving earlier in your life. The good news, though, is that you still have options. Here are three things to start doing immediately if you are worried about having enough for retirement:

1. Start saving now
The key is to start saving as soon as you think of it. Putting it off for another year or longer isn’t going to make things better. You can start small and gradually increase the amount of money you put away as you adjust to your new monthly income level. Keep an eye on your investment.  You’ll be surprised at how quickly a small deposit every month adds up.

2. Save more aggressively
Starting small is better than not starting at all, but it’s best to start saving aggressively, especially if you have put off investing in retirement. If your company offers a 401(k) match, make sure you are putting away at least as much money as you can to get the match. That match is literally free money, which we can all agree is pretty rare.

3. Start automatically saving
Start treating bonuses, tax refunds and any other “found” money as part of your retirement plan by automatically depositing it into your Roth IRA or 401(k) account. You won’t even miss it, but you’ll thank yourself when it’s finally time for you to retire.

I am worried I do not have enough money saved. Now what?

Let’s start with what not to do if you haven’t saved enough for retirement. For starters, don’t “take risks in order to catch up,” according to Birken. This means you shouldn’t try to overcompensate for your low retirement savings by making risky investments with the high hopes of making bank in your golden years.

To that end, “there are always things you can do to improve your situation,” explains Updegrave. Some things to consider if you are near or at retirement age but don’t have the nest egg you need for a full retirement include:


The retirement experts I spoke with seem to all agree on one thing: delaying retirement for one or more years might be all it takes to keep yourself comfortable enough to retire for good. “Delaying retirement can have a really big impact,” says Updegrave. Moss encourages people to think of taking a “junior retirement” before fully retiring, meaning you would work part-time doing something you enjoy. Moss considers junior retirement to be “a great intermediate step” and a way to “bridge the gap” between full-time employment and full-time retirement. “Retirement planning is not as black and white as it used to be,” according to Moss.

Many people are choosing to take a step back from their working roles without fully retiring, and we should expect to see this trend continuing with Gen X and Gen Y. Bera predicts that the current trend of retirees turning to what she calls an “encore career” when they reach retirement age will continue with future generations. Millennials especially seem to be thinking about their future when they choose to work in a company that rewards them with opportunities to learn new skills and move into different positions within the same company. Knowing they aren’t going to be able to just work for 30 years and retire, millennials are more invested in finding companies that allow them to grow and have the potential to be fulfilling for 50 or more years.

However, just because the average retirement age for millennials is predicted to be 73 as opposed to today’s retirement age of 65 doesn’t mean millennials should plan to work until they are in their mid-seventies. “Don’t put yourself in the position where you have no choice” warns Updegrave. Start saving and investing now so that you have options in the future.

What to avoid

There’s no one way to build a retirement plan, but there definitely are things you should avoid in order to meet your retirement goals. Here’s some expert advice on common mistakes people make when they are nearing retirement:

Saving big projects for your newfound free time
One big mistake people make is “trying to renovate a house after they stop working,” according to Moss. It’s very common for people to put off renovations for years, decades even, until they are retired, focusing largely of the time they will have to put up with a renovation instead of thinking about the financial burden of such a large product. Moss suggests that people “try to take care of big renovations and big ticket items while you are still working” so you know you have the income stream to handle the financial burden.

Not planning for market downturns
Instead of preparing for ups and downs in the market, Moss says people make the mistake of “thinking the market’s going to steadily plod along.” There are going to be great years and there are going to be years when the market dips. The key is to transition from investing to saving as you move closer to retirement so dips in the market don’t disrupt your plans when you are ready to retire.

Thinking they have time to save later
“Not saving enough and not getting started enough” are two big mistakes people make when planning for retirement, according to Updegrave. Even starting small when you are in your twenties will pay off compared with waiting until you have a bigger paycheck, thanks to compound interest. Aim to save 15 percent of your income if you start saving in your twenties and more if you start saving later.

Making plans based on things that are out of your control
A common mistake among retirement savers and investors is they “will make their plans for retirement contingent on things that they cannot control,” according to Birken. Some examples include the market as well as getting a massive inheritance that will cover much of their retirement expenses. “Every individual who plans to retire needs to recognize that he or she can only count on his or her own actions. Markets are volatile, promises can be reneged, and nothing is guaranteed. But you have complete control over your money and your plans, and you can change both as needed,” advises Burken.

Do I need professional help?

Whether or not to seek professional financial advising for your retirement plans is up to you. The experts agree that it is entirely possible for people to successfully manage their retirement portfolios. However, as Moss says, your success might depend on “if you like it.” If you’re not a numbers person and/or the thought of having complete and total control over something as significant as your retirement savings makes you anxious, it’s probably a good idea to find a financial adviser who can handle all the dirty work for you.

How to find the right financial adviser for you
The first step to finding the right financial adviser for you is understanding how they make money. After all, they aren’t doing you a favor by helping you with your finances. They’re doing their job, and in order to do their job well, they need to be making money from you somehow. According to Birken, here are three main ways financial planners get paid:

1. Commission
A commision-based financial planner is the most common, which can be really confusing for you as a consumer. This type of planning fee means that your financial planner only makes money when you buy a particular product through him. Your commision-based financial planner might genuinely have your best interest at heart, but it can be difficult to tell when there is such a high potential for a conflict of interest.

2. Fee-only
Most retirement and financial experts will recommend consumers to find and hire a fee-only financial planner. This payment structure means you pay a flat rate, so your financial planner gets paid no matter what products you do or do not buy, thus maintaining a more objective outlook of your portfolio. You might pay your fee as a percentage of the total value of your account, as an hourly rate or as a flat fee.

If you’re going to be working with your financial planner long-term, then finding one who gets paid a percentage of your account’s value is a good idea because, ideally, your planner will have incentive to help you grow your portfolio since she will get a cut of your success. If you’re just starting out with a financial planner and/or are more generally looking for advice on a particular issue, such as your retirement portfolio, starting out with an hourly rate or flat fee financial planner might be your best option.

3. Fee-based
Not to be confused with fee-only, a fee-based financial planner will be compensated both by fees that you pay directly and by commissions they receive through sales and/or recommendations of certain products.

Enjoy your second act

Today’s retirement is vastly different than what we’re used to thinking of when we picture retirement. Retirees today are living longer and are using their retirement years to fulfill their dreams and passions through volunteer work, non-profit work and part-time work. Based on Collamer’s experience as a career coach, some retirees are taking part in fun and exciting ventures including travel blogging and working as park rangers for half of the year, while others are applying their corporate skills to non-profit work. Still others are taking advantage of the rise in flexible part-time work available such as freelance writing and even driving for Uber.

All of the above second-act careers give retirees a way to make some extra income while doing something they enjoy. To reap the reward of a fulfilling second act, though, it’s important to have enough money saved up in the first place to take a significant pay cut during your semi-retirement: “The more you have in the bank, the more flexibility you have” to pursue a second-act career that speaks to you, says Collamer.

Reaching retirement age doesn’t mean you need to completely quit your full-time job and switch to a new field. Anecdotally, Collamer knows of several people who are arranging a structured semi-retirement with their employer. Collamer explains that many retirees are able to work with their employer to work part-time for a specific, agreed upon amount of time. During their period of semi-retirement, they serve as a mentor for their successor, which can be as much a benefit for the company as it is for the semi-retired employee. Many companies don’t offer this type of semi-retirement as an official, organized program but will be willing to work with their employees to develop one. Talk to your employer if this is something that might work for you and benefit the company at the same time.

One thing that is important to recognize is that you might have limited options if you did not save enough for retirement, particularly if you do not have highly marketable skills. To that end, if you still have time to save, it’s time to “double down on saving while you’re working,” according to Collamer. You “might have to think outside the box” when it comes to finding a way to keep up your income during your retirement years if you are in this type of situation, says Collamer.

Conclusion

There’s no denying that retirement has changed drastically over a generation, and it will continue to do so for future generations. The one thing that hasn’t changed is the need to plan ahead so you can retire when you’re ready without suffering a major financial setback. Start saving and investing in your retirement now if you haven’t already, and start contributing more money into your retirement account(s) if you are worried you won’t have enough.

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