Invest Now, Relax Later

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Retirement can feel like something to worry about “later.” But the truth is, “later” arrives more quickly than most people realize. Early and consistent investing is the key to achieving the peaceful, financially secure retirement many envision. Here at Great Plans Capital Management, we encourage individuals to adopt a forward-thinking strategy, focusing on long-term growth rather than short-term gain. In this blog post, we’ll walk through why starting now can make all the difference, how to shape your investment plan, and which considerations are essential for a comfortable retirement. Please keep in mind this is general advice, for a plan tailored to your situation, consider scheduling a consultation with our team.

The Power of Starting Early

When it comes to retirement, time can be your greatest ally—or your worst enemy. The concept of compound interest demonstrates why starting now pays off significantly down the road. Essentially, the earlier you begin to invest, the longer your money has to grow and compound on itself. That compounding effect can lead to exponential growth over the decades. For instance, if you begin contributing to a retirement account in your 20s or 30s, you may need to invest less monthly to reach a similar goal compared to if you started in your 40s or 50s.

Moreover, beginning early allows you to ride out market fluctuations. Even if the market dips, you have more time to recover losses and benefit from subsequent upswings. You’re also in a position to take on slightly higher risk (if appropriate for your circumstances) because you have time to adjust your portfolio before retirement.

Determine Your Retirement Goals

Before building an investment plan, define what you want your retirement to look like. Do you envision traveling around the world, or do you plan to downsize and live close to family? These lifestyle choices will directly influence the amount of money you need to save. Calculating monthly expenses such as housing, healthcare, leisure activities, and any debts can give you a clearer target.

There’s no universal formula, but a commonly referenced guideline suggests aiming for about 70–80% of your pre-retirement annual income to maintain a similar standard of living once you stop working. However, this figure is just a starting point; you may need more (or less) depending on your personal aspirations, health needs, or family responsibilities.

Diversify Your Portfolio

A well-diversified portfolio can help mitigate risk, especially during market volatility. Spreading your investments across different asset classes like stocks, bonds, mutual funds, and sometimes real estate or alternative investments reduces the impact of a downturn in any one area.

  • Stocks (Equities): Historically, stocks have offered higher returns over the long term, but they can also be more volatile.
  • Bonds (Fixed Income): Bonds are generally more stable than stocks but often yield lower returns. They can serve as a buffer when the stock market experiences turbulence.
  • Mutual Funds and ETFs: These pooled investments allow you to diversify across multiple companies or market sectors, helping spread risk.
  • Alternative Investments: Real estate, commodities, and other alternatives can sometimes hedge against inflation and complement traditional assets.

Selecting the right mix of assets depends on your risk tolerance, age, and financial goals. It’s a balancing act, one that may change over time as you approach retirement.

Use Tax-Advantaged Accounts

To maximize your long-term gains, take advantage of tax-deferred or tax-free investment vehicles, such as:

  • 401(k) or 403(b) Plans: Employer-sponsored retirement plans allow you to contribute a portion of your pre-tax income. 
  • Traditional IRA: Contributions may be tax-deductible, and any potential earnings grow tax-deferred until you withdraw them in retirement.
  • Roth IRA: Contributions are made with after-tax dollars, but withdrawals in retirement are typically tax-free. This can be especially beneficial if you expect to be in a higher tax bracket in retirement.

Each type of account has annual contribution limits and specific eligibility requirements. Maximizing your contributions helps ensure you’re not leaving potential savings on the table.

Review and Adjust Your Plan Regularly

Your retirement strategy shouldn’t be a “set it and forget it” affair. Life events (marriage, having children, job changes) can alter your risk tolerance and the amount you can (or need to) save. Market conditions also shift, which might necessitate rebalancing your portfolio. Regular reviews, ideally at least once a year, help ensure that your asset allocation remains aligned with your goals.

When you’re younger, a more aggressive approach might make sense since you have more time to recover from market dips. As you inch closer to retirement age, it often becomes prudent to move toward conservative investments that safeguard the wealth you’ve built.

Seek Professional Guidance

While there’s a lot of information available online, retirement planning can be complex, particularly if you’re juggling multiple goals, have unique tax considerations, or need to include spousal benefits and legacy planning. Meeting with a financial advisor can help bring clarity to your strategy. At Great Plans Capital Management, we conduct a thorough review of your financial picture, from income and expenses to existing savings and investments to create a personalized plan.

An advisor can also keep you accountable, adjust your strategy as needed, and offer a seasoned perspective on matters like Roth conversions, required minimum distributions, and long-term care planning. While this blog provides general guidance, every individual’s situation is unique, so professional input is invaluable.

Put in the Work Now, Relax later

Retirement planning is about preparing for a future where you can enjoy the fruits of your labor without undue financial stress. By starting early, identifying clear goals, diversifying your portfolio, and taking advantage of tax-efficient accounts, you can give yourself the best shot at a comfortable life in your later years.

For more detailed advice tailored to your own needs and circumstances, consider reaching out to Great Plans Capital Management. 

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