If you were to ask me to boil down the basics of saving for retirement, it would go something like this: Start saving, get a plan together so you know how much to save and keep revising the plan to make the assumptions more accurate.
Many people skip the third step of continually trying to improve the plan. But an efficient plan can help shave off years of working 9 to 5 and also reduces stress because you are simply more in tune with your progress. Interested in some improvements? Here are some suggestions:
Focus on income in retirement instead of just a number. Striving for a number saved for retirement can be a good first step, but you need to know how that nest egg will turn into an income stream to pay for your expenses. You can't just bring your brokerage statement to the grocery store and expect the cashier to sell your shares to cover the bills, right?
Be aware of how much you have in pre-tax and post-tax accounts. Guessing future tax rates well into the future is impossible, but you should know that money in pre-tax accounts needs to be discounted because Uncle Sam owns at least a portion of those funds. Having $100,000 in a Roth IRA is a completely different situation than having the same amount in a 401(k). %VIRTUAL-article-sponsoredlinks%And if that money is in a taxable account, you should figure out how much of it was generated by capital gains in case you need to ever withdraw from the principal.
Appreciate the power of inflation. While not everything will be more costly, the general trend of your spending will always go up due to inflation. A millionaire may have been uber-wealthy in 1980, but many millionaires today consider themselves to be middle class. By the time you retire, a million dollars will be worth even less. Factor that into your projections for the income you will need in retirement.
On the flip side, your hard work will translate into much higher wages down the road. Most people move up the ranks as their career progresses, but even those who don't get many promotions will at least get inflation-adjusted salary increases. Just as inflation should be added to your spending projections, your continual improvement in saving amounts each year should be factored in as well.
Recognize that good times and bad times will both occur regularly. Stop being too optimistic when the stock market is roaring and too pessimistic during market crashes. Even market experts tend to extrapolate from recent market returns and assume the world has changed. But resist the temptation to overreact, because a down market will snap back eventually and an overheated market will loose its luster. That's just how the market works.
Weigh your long-term needs. Your ability to save is the number one deciding factor on whether you can retire comfortably or not. That shiny pair of new shoes, incredible deal on a 100 point wine or life-changing iPad may seem like the only obstacle to profound happiness. But let's face it, that same thought about a different product crossed your mind a few short months ago.
Think about details other than the financials. Money can be the biggest retirement worry, but life isn't just about dollars and cents. Where do you plan to live? Where are your friends and family? How can you be happy? Think about this carefully, because spending more isn't always the answer.
Retirement planning is difficult because you are trying to make assumptions about events many decades in the future. When you think you have a solid plan, read it over and think about it some more. Chances are good that you can still improve upon the model.
Walking dogs is a great way to stay fit, and many working individuals and families simply don't have time to give their pets the exercise they need. Dog walkers can charge $15 to $25 an hour, per dog.
Websites like Etsy.com have exploded the market for handmade goods of all sorts in the past few years. While it takes a lot of work to make a full-time living selling crafts, many retirees, stay-at-home moms and 9-to-5 workers turn their hobby into part-time income by selling crafts online. Whether you love to knit scarves, hand-quilt throws or throw pottery, there's an online market for your craft.
Retired teachers aren't the only ones with potential tutoring skills. If you're good in math, reading or other basic skills, tutoring could be a lucrative option. Advertise your independent tutoring services through word-of-mouth or Craigslist, or join an online tutor-finding service like Wyzant. Another option is to sign up with a local non-profit that pays tutors for their services.
If you love shopping for antiques, collectibles or other unique finds, consider shopping for them and then reselling them. Cruise estate and garage sales to find great deals, which you can turn around and sell on eBay or Craigslist at a profit.
If you're good with a wrench and know your way around crown molding, consider advertising your handyman services. Your state may require that you become licensed, especially for certain types of work, so check with your state's contractor licensing board to get started.
Engineers, scientists, management experts and others can all form careers as consultants. According to the Bureau of Labor Statistics, consultants in management make a median annual wage of $75,250, but you can also consult part-time for a high hourly fee. Turning your one-time profession into consulting jobs may be easier and more lucrative than you'd think.
If you're still healthy and mobile yourself, consider spending time with older folks who need help with everyday activities. Elder care can involve basics like running errands or giving a shut-in some regular company, or more involved activities like basic hygiene and nursing. Either way, this can be a fulfilling option.
On the other end of the spectrum, you could spend time caring for kids. As long as you've got the energy to keep up with little ones, you could offer all day or after school care for local children or even your own grandchildren. Just be sure to get and stay up to date on the latest nutrition and safety recommendations.
Maybe you don't really want to have a job, but have extra space in your home that you don't need. Consider taking on a renter in your spare room or basement. If you're traveling a lot during retirement, you could also rent your whole home out for short-term vacations.
Starting a blog is a great way to share your passion with the world, while making some extra money. There are plenty of online resources to teach you how to start, run and monetize a blog on just about any topic that interests you.
If you'd like to work sometimes and not others, consider signing up for temporary work. As employers seek to cut costs, many are hiring temporary workers to fill a myriad of roles. Temp jobs can let you experience lots of different types of work during retirement.
If you love growing fruit and vegetables, consider selling your extra produce at farmer's markets. Heirloom produce is in high demand right now. Another option is to grow perennials that need to be split each year. Each time you split your plants, you can sell the extras to aspiring gardeners.
If you're a local history buff or love the arts, consider finding opportunities to be a local tour guide or museum guide. You could even start your own local tour business, if your area is frequented by travelers.
Upcycled furniture is all the rage today, but some people simply don't have the time to spray paint and decoupage old pieces to give them new life. Retirees could upgrade old pieces of furniture and sell them online or locally, or offer their services for custom furniture upgrades.