Whether you're 20, 10, or five years from retirement, these tips and tricks will ensure that you spend your golden years in good financial shape.
Don't: Assume you need a massive paycheck
If the act of building a giant nest egg seems futile, take heart. Remember that compound interest can do much of the heavy lifting for you. "You'll get so much free money when you save over time," says Alexandra Taussig, SVP and head of the Women Investors Initiative at Fidelity. For example, if you had $85,000 in savings by age 45 and kept saving $800 a month, you'd hit retirement with $740,000.
Do: Set a stretch goal
"You want to have four times your salary saved by age 45 and six times your salary saved by age 50," Taussig says. If you're not quite there yet, don't panic. Until you've reached 15 percent of your pretax income, bump up your 401(k) or IRA little by little. "You probably won't miss 1 percent of your paycheck, but it can make a big difference over the next two decades," says Emily Guy Birken, author of .
Don't: Dawdle in debt
You might see that car payment or credit card bill as just an annoyance, but Chris Hogan, author of Retire Inspired, wants you to see it instead as a dream crusher. He suggests making a list of all your debts and attacking the list with the snowball method: Make the minimum payments on everything, but throw every spare dime at the smallest balance. When you knock out one debt entirely, it'll give you momentum to move on to the bigger balances. And once you're debt-free, you can double down on retirement savings.
Do: Embrace some risk
Finance pros suggest setting aside three months of living expenses or 5 percent of your monthly income for emergencies. But remember that investing is the best way to build your wealth for retirement. For your 401(k) or IRA, consider target-date funds, which automatically adjust the mix of stocks and bonds they hold over time, favoring more risk (and growth) in your 40s and less as you get closer to retirement age.
Don't: Go it alone
Everyone within a decade of retirement should meet with a financial pro—and continue with quarterly or biannual check-ins, says Hogan. Having someone in your corner can lift your retirement portfolio—and also your commitment to and confidence in a financial plan.
To find financial help, look for a "fee-only" firm or adviser. These charge only based on the service they provide and don't receive a commission for selling financial products.
Do: Save more
After age 50, you're allowed to make so-called catch-up contributions: Typically, you can put $1,000 more in your IRA or an additional $6,000 in your 401(k). Do everything you can to take advantage of those opportunities to save extra. "Supercharging your savings for a decade will pay off in the long run," says Hogan.
Do: Go mortgage-free
The median monthly mortgage payment for people in the decade before retirement is $989, according to ValuePenguin, a financial data site. But if you can pay off the rest of your mortgage early, you'll be able to put that money toward retirement instead—and save the thousands of dollars you might otherwise pay in interest. "Remember, any interest you pay is a penalty," says Hogan. Eliminating the mortgage entirely might feel elusive, but chipping away at the principal is worth the effort. "Whether it's a couple hundred bucks a month or just one "extra" payment a year, it can be a real game changer to help people boost their retirement savings in the future," he says.
Don't: Quit working
Staying in the workforce until age 67 delivers a trifecta of positive outcomes: You'll earn salary and benefits, you'll delay dipping into retirement accounts, and you'll prevent having to live on early Social Security. To see exactly what an extra year or two might do, have a financial planner run a few scenarios, says Hogan: "If working two more years will mean an extra $1,000 a month when you retire, you'll likely find the additional years of working are worth it."
Do: Make a budget
How much will you have to spend each month in retirement? If you're not sure, you're not alone: A Fidelity survey of more than 1,000 couples found that 48 percent had no idea what their monthly retirement income might be. You can talk to a financial planner or adviser about your retirement plan to figure out that piece of the puzzle, but you'll also want to mock up a budget to determine if that monthly money is enough. Some expenses will likely shrink in retirement (think commuting costs, afternoon coffee breaks), but categories like travel, utilities, and healthcare could all inch upward. "Many people assume that Medicare is free, but it's not. It can be a significant monthly expense," says Taussig. If there's a big gap between your expected income and your expenses, you do have options: Whittle down your planned costs, stay put in your job a bit longer, or get creative with part-time work or side gigs to boost what you're bringing in.
Do: Make a withdrawal plan
"We talk a lot about how to build up your savings, but we don't talk enough about how to access it," says Birken. With a systematic withdrawal approach, for instance, you live off the interest your portfolio earns. With a time-based segmentation approach, you divvy your assets into three buckets based on when you'll need the money: easy-to-access CDs or money market accounts for the next one to five years, low-risk bonds for the next six to 15 years, and more aggressive stocks for 15-plus years in the future. You don't need crazy finance skills to have this conversation with a planner. She should be able to explain how your retirement income will be structured, what risks are involved, and what might need to be rebalanced in the coming few years to get you ready for retirement.