A comfortable retirement may seem harder to reach than ever before. But those with the right attitude will still make out OK. Here are a few ways to prepare for retirement that never go out of style:
Do what motivates you to save. Throughout your life you will be faced with many financial decisions: Do you pay off the mortgage early or do you invest that extra sum of money? Do you pay off high interest debt or do you pay off the smallest balance first? Many people opt to follow what the math says, but the right approach is always the one that will give you the best results.
For example, will you actually invest the extra money if you don't use it to pay off your mortgage or will you spend it? And we all know we'll pay more in interest if we don't pay off the debt with the highest interest rate first, but some people are more motivated when they pay the smallest balance off first because it gets them excited to think of new ways to save. Sometimes emotions win over math because personal finance is all about persistence and discipline. If you decide to follow the math, then make sure your behavior tightly follows the model you envisioned in your calculation.
Stop worrying about whether making or saving money is the better way to build wealth. This debate will probably rage on forever, but a dollar is a dollar whether you saved it or earned it. Rather than trying to figure this out or spending time defending your position, why not spend time maximizing whichever comes more naturally to you? Some people find it easier to find ways to make more money while others love saving money. When you are done perfecting one strategy, give the other side a try too. It's actually better to work on both than to concentrate on just one of the two ways of building wealth.
Tax deferral is a good strategy for practically everybody. If a comfortable retirement is your goal, then make tax deferral a priority. There are all kinds of reasons you haven't put the maximum amount possible into tax-advantaged accounts every year. But every one of those excuses is leaving money on the table. Tax deferral will ultimately allow you to pay a lower tax rate on all or part of your withdrawals, especially if you drop into a lower tax bracket in retirement. Plus, you won't have to pay taxes on gains, dividends and interest year in and year out. That's money you could spend on necessities, traveling, food, toys for your grandkids and whatever else you fancy in retirement.
Start as early as you can, because there are so many benefits. The compounding effect is powerful, but that's just the beginning of why starting to save early is great. It's so much easier to learn frugal habits when you aren't used to an expensive lifestyle, because you already know you can live happily on Ramen every day. When you begin to save at an early age you won’t have to play catch-up later in life. And you'll never let accidents wipe you out because you will always have a savings cushion.
Spend time on financial education. Investing can be simple and effective, but there are also many sub-optimal ways to go about it. Many people waste too much money and countless working hours making investing mistakes. Even if you have a money manager who handles your nest egg for you, it's imperative that you learn how markets and investing work so you can guide your adviser to make the most prudent decisions for you at all times.
A comfortable retirement is still possible for people who save consistently throughout their careers. Use these time-tested strategies to build wealth for the future.
David Ning runs MoneyNing, a personal finance site that shares money moves you can make to significantly increase your chances of having a comfortable retirement. He likes to share simple changes that anyone can make, such as picking the best online savings account and figuring out whether a 0 percent balance transfer credit card makes sense.