Retirement can be a scary thing, especially if you’re not prepared. It is no secret that most people feel unprepared when it comes to saving for retirement. They either were unable to save enough or thought they had enough until the time came. As a general rule of thumb, a household needs about 70% of the preretirement income to maintain their lifestyle. Social Security can replace about 36% but how do you make up for the rest?

In a perfect world, a person will start saving in their 20s and save about 10% of their pay annually. But most people do not start saving until later down the road. So if you are playing catch up, what behaviors can you adopt to make sure you are set for retirement?

Everyone knows that saving for retirement can be a drag in the present, but your future self will definitely be thanking you for handling your money responsibly. Some of these behaviors you should use to play catch up may seem obvious, but a surprising number of people don’t use them.

  1. Create a budget- This is finance 101; budgeting your monthly expenses versus your income is a great way to monitor and manage your money. By doing this, it will present you with what you have and what you don’t have. It is important to have an understanding and being smart with your money. You can budget in saving for retirement so you already know you won’t have that money for the month. A great tool to use to begin creating a budget is Mint.com. By creating an account and linking your checking, savings, credit cards and retirement accounts you can easily see where your money is going and begin to create a budget from there. It is easier than starting from scratch and it is free!
  2. Take advantage of your workplace retirement program- If your employer is willing to take out 10% of your annual pay to put into an account for you, do it. If you employer is willing to match whatever you put in your retirement account on an annual basis, do it. It is basically free money.
  3. Calculate how much income you will need to replace in retirement- It is hard to forecast what life will be like outside of the workforce. You have spent a large amount of your life working, having an income and providing for your family. It is important to figure out how your savings will translate into a monthly retirement income.
  4. Discuss your retirement lifestyle with your family- Life changes after retirement, but it shouldn’t change drastically. Having a mutual understanding of how your family will live is beneficial to the lasting of your savings.

There is no perfect way to go about saving for retirement. Life gets in the way and it is hard to have everything go according to plan. But by understanding the importance and changing your choices, it can make a world of difference when it comes time to retire. 

If your children have their own steady income and you’re approaching your final years on the job, separating your lose change into the mason jars on your kitchen counter may no longer be considered savvy. As you prepare for retirement, diversifying your funds or “spreading your money around” becomes a smart decision in the process.

This isn’t a means of opening multiple bank accounts, rather actually investing your money instead of letting it sit.  Not only can you gain income, but protect against loss if a market begins to fall. How? Well, if your money is invested in multiple sectors, the odds of one market failure creating the downfall of an entire portfolio becomes significantly less likely.

Investing in stocks and bonds sounds like a heavy gamble to some, but this decision will be to your benefit if variety over quantity is taken into consideration. Again, this strategy reduces the overall risk of considering investments as a waste. First, it’s important to understand that stocks help build a portfolio, bonds help the money pot grow, real estate may rise when stocks fall, international investments help growth and maintenance in finances and cash keeps a portfolio sound in terms of security and stability.

Although there are many combinations of strategies for choosing stocks and bonds, here’s one just to get you started. It has been suggested as a “rule of thumb” to subtract your age from 100 (with people living longer the better number to use is 120) and put the resulting percentage in stocks and the remaining in bonds. There are also particular rules that diversifying funds adheres to:
- At least 75% of available finances are invested in securities
- 5% or less of investments are invested in any one security
- The investments should have no more than 10% of the shares for one security

Of course, before investing you should first understand the objectives, risks, and benefits of your investments based on your financial stance. It also takes time to manage a portfolio with a wide range of investment rather than a coherent one where investments remain in one sector. In this case, time is definitely money. However, it is nearly impossible to completely diminish a potential risk factor like market risk. But this risk is not based on a gamble, rather the risk is managed.

The best route is to seek a financial advisor to figure out the best decisions for you and setting a goal before retirement. With this strategy and the right moves, you could be on the road for early retirement and not even know it.

You put a lot of effort into your financial portfolio, understandably so. You work hard for your money and took the time to make sure you are getting the most out of your investments. With all this time (and money) invested into your future, it’s important to make sure you’re continuously assessing your portfolio’s performance. Assessing your portfolios performance is exceedingly important to the long-term goals of your investments. Unbeknownst to many, portfolio evaluation goes much further than tracking your investments.

The fact is, your portfolio won’t always be perfect. In the face of different markets, your portfolio can change in a good or bad way. It’s important to not be afraid to identify your portfolio’s strengths and weaknesses to better understand how you’re doing and where you can improve. You might think you are getting the best return, but how will you know if you don’t evaluate? There are an assortment of methods you use when evaluating your portfolio.

You can evaluate your portfolio by the measures of your return. It’s safe to say that most of us want to get the most out of our investments. Since a profitable return is the ultimate goal of any investor, measuring your return is an indicator of the performance of your portfolio. The return on your investment can be influenced by a series of things, like the amount of additions and withdrawals and the timing of them. There are two types of measurements of return, the time-weighted return and the dollar-weighted return. These two measurements provide different views on how your investments are doing.

Time-weighted return is the measurement of the historical performance of an investment portfolio. This method of evaluation allows for compensations for external flows, the net movements of value that result in transfers of assets into or out of the portfolio. Dollar-weighted return is the measurement of the rate of return from the assets of the portfolio. This is calculated by determining the rate of return of the present values of all assets in comparison to the initial investment.

Another way to evaluate your portfolio is through projections. At the beginning of your investment process, there are projections made for how your investment is anticipated to perform in the future. Projections are relevant to assessing your portfolio’s performance because they provide you with a basis of what your investment should look like. If things begin to look awry, a projection will provide you with a foundation to know where your portfolio should be.

Evaluating your portfolio is important because, like most of us, you’re pretty attached to your money and want to make more. You want to know how well your investments are performing and make sure you continue to do well. If things aren’t going well, it’s important to be aware of the undesirable results of your portfolio and to have the opportunities to improve them.

Stick to your instincts, if you feel like your investments could be doing better; assess them in a few different ways to get the best understanding. Don’t be afraid to take charge, you want to get the best return.

When you think of the word conservative, you may think of its synonyms: timid, traditional and stable. Those words don’t necessarily scream a lot of return on your money. If you are young and have a lot of flexibility in your fast paced, jet setting life, a conservative portfolio probably doesn’t do much for you. Butas you get older, (unfortunately) your priorities change. It becomes a bigger risk to be investing your money in the fast paced, uncertain stocks that you did in your 20s and 30s. You want traditional, stable and timid when it comes to investing as you age.

Why do you want these three words to describe your portfolio? Simple, you want to build your portfolio to last. Conservative investors have a risk tolerance ranging from low to moderate. At this point in your life, you are not concerned about increasing the values of your investments. The main goal of having a conservative portfolio is to maintain real value and protect it from inflation rates. So, if you invest highly in bonds, you will create a high amount of current income. In these investments, you are concerned with their current stability and the return that you are getting from them.

How do you build a conservative portfolio that is low-cost and minimizes your risk? A conservative portfolio should meet these four criteria: plan for potential losses, set aside meaningful income to reduce the need to sell in a declining market, create a neutral or positive correlation to interest rates, and have realistic expectations about return. These factors will allow you to have sound investments with confidence and clarity.

Unlike in your 20s, 30s or even 40s and 50s, you do not have the luxury of starting over if you face hard times. By building your portfolio to last, it will give you high confidence that you will maintain stability with the time value of your money. So as your priorities shift, and your financial needs change, a conservative portfolio will keep confidence in your changing life.

Why take more risks than you need to? Ask yourself: what is the end goal of my portfolio? The answer should be pretty simple: to sustain my family through my retirement. It is important to understand the characteristics of your portfolio, and how those characteristics will compliment each other to accomplish your goals. How do you do this? Invest wisely. Conservative portfolios will consist of mainly cash or cash equivalents. So the best strategy is to hold about 20% in stocks and 80% in bonds and cash. It is always important to have a back up plan, just in case you face a bear market. If the stock market crashes, you should not lose everything. In the face of a bull market, you should get a nice return. Confidence is key, and a conservative portfolio will keep you confident in your investments.