Retirement may seem like paradise—endless days of spending time with family, traveling, and, most importantly, not having to be at work eight hours every day.
But the ability to retire requires a lot of financial planning.
“If you follow good savings habits throughout your career, you will be happier at retirement age,” says Debbie, a retired teacher from central Illinois who stopped working just over a year ago. “Retirement age will be here faster than you think.”
If you’re worried about your own ability to retire, take some advice from current retirees. Despite the ups and downs of life—and a few mistakes along the way—these people made their retirement dreams a reality.
Start saving and investing for retirement early. Pam worked as a technology administrator in Wisconsin for 20 years before retiring about four years ago, but she didn’t start saving until it was much too late.
“When you’re young, retirement seems very far away. It doesn’t seem like something you have to worry about,” Pam says. “But that’s where you get into trouble.”
She suggests starting to save as soon as possible. “It’s never too early. Put as much away as you can when you’re young because once you have a family or house expenses it becomes more difficult to increase the amount you have withheld [for retirement savings].”
Contribute as much as you can to a 401(k) or other company-sponsored plan. Debbie’s husband’s job allowed for saving through a 401(k), and she says she regrets not having the maximum allowed taken out of his checks, especially because his company matched 401(k) savings.
“I read some financial books on planning for retirement when I was in my early 30s. Everything I read said ‘pay yourself first,’” says Debbie. “That’s probably the best advice I can give.”
In addition to saving through a 401(k), put as much money as possible into other savings accounts. Mutual funds and IRAs are examples of great ways to save for later down the road, suggests Debbie.
“We didn’t have much to contribute [because] we had five small children,” Debbie says. “If I could go back, I would start contributing to some type of account sooner.”
Don’t rack up huge debts before you’re retired. Any debts you have from before you’re retired will still have to be paid after you’re retired—but on a fixed income, warns Richard, who worked for 40 years as a welder before retiring about a decade ago.
Richard enjoys traveling, but both he and his significant other have to work part-time jobs to save for travel because much of their retirement savings went to paying off a home they bought later in life, as well as credit card debt.
“Before you buy, ask yourself, ‘Do I really need that?’” Richard suggests. “If the answer is no, then don’t get it. You’ll be more financially secure when retirement age hits.”
Don’t forget that you may continue to have big expenses in your retirement years. With five children, Debbie has already helped to pay for two weddings, and now she has another engaged daughter.
Now that she’s retired and has a pension, Debbie puts money from infrequent substitute teaching jobs in an account for big expenses. Still, she says, she regrets not starting that kind of emergency account earlier. “I wish I had saved entire paychecks for things like [kids’] college and wedding expenses and travel.”