You think you are an assiduous saver and are doing all you can to ensure you have a secure retirement. But how do you know if you’re doing things right? It’s tough to guess how much money you’ll need, and it seems unfeasible to know if you’re on the right track when retirement is years or even decades away.
Fortunately, there are some easy ways to tell if your retirement planning is sound.
- Find out where you stand now.
The plan here is to see whether what your present plan to get ready for retirement is really working. The point is that by going through this exercise periodically and seeing whether your probability of success is trending up or down, you can get a more realistic sense whether you’re moving toward a secure retirement or not.
- Take a look at your retirement investments.
It’s for all time a good thought to step back from time to time and re-examine your investing strategy. But this approach seems critical in today’s market. So how do you know whether your savings are invested aptly? Start by calculating how your portfolio is currently divvied up between stocks and bonds. Your aim, though, should be to make sure your investment strategy is aggressive enough to earn the returns you’ll need to build a nest egg large enough to hold all through retirement and not so aggressive that you’ll panic and sell your stock holdings when the market goes into one of its periodic slumps.
- Put up a safety cushion.
Even if it appears that your retirement planning is on track, you’ll still want to improve your odds. The reason is life often throws you curveballs that can disrupt even the best-laid retirement plans. For example, job loss and some critical illness can eat your retirement corpus.
While there may be little you can do to avoid such setbacks altogether, you can take measures to alleviate their impact. Such as by maintaining an emergency fund equal to three to six months’ worth of living expenses on hand, you may be able to deal with such condition of unemployment without dipping into your retirement corpus. You can also opt for a critical illness plan to secure yourself financially against major critical illnesses. This will prevent you from exhausting your savings. Pushing yourself to save even just an extra percentage of your salary throughout your career can appreciably increase the size of your corpus, which in sequence can give you a cushion for dealing with any contingency.
By doing periodic checkups along the lines you’ll be capable to retire in the style you see in your mind’s eye.