If you are a Millennial or especially if you’re Gen Z, you might think of retirement as being in the distant future. However, preparing for retirement is incredibly important – even if you don’t plan to retire early.

The reason it’s crucial not to delay retirement planning is because reaching your retirement goals can take many years. This is particularly true for retirement savings.

While that can sound intimidating, it doesn’t have to be. With proper planning and a few small changes, you can set yourself up for a comfortable and secure retirement.

What do those changes entail? Stay tuned – that’s what we’ll cover in this post.

1. Fund Your Retirement Plan

Funding a retirement plan is the single most important step you can take toward securing your future retirement. That may not be necessary if you are one of the lucky few who still has a pension; for the rest of us, adequate retirement savings are essential.

We also cannot assume Social Security will cover our expenses in retirement. The program is fast approaching insolvency due to a shrinking workforce, among other factors.

Since no individual can fix the innumerable problems orbiting Social Security, the best we can do is make sure we have ourselves covered. On the plus side, covering our own retirement is much easier.

As mentioned above, the first step is ensuring you are funding your employer-sponsored retirement plan, such as a 401k or comparable plan.

Some employers make these contributions mandatory and automatic, but many do not. If you aren’t sure whether you are already contributing to your plan, contact your employer’s benefits office.

Many employers offer matching contributions, which is exactly what it sounds like. The employer will match any contribution you make, up to a limit the employer sets.

The 401k isn’t the only weapon in your retirement arsenal, either. Many people choose to open an individual retirement account (IRA) as well. Growth on these accounts is not taxed, and the Roth variant has no early withdrawal penalty.

A common strategy is to fund an employer-sponsored retirement plan up to the limit of your matching contributions and then move to the IRA. The reason for this is IRAs often have more flexibility in the investments you can choose.

However, IRAs do have a somewhat low contribution limit ($6,000 for individuals in 2020). Those who max out their IRA contributions will sometimes then move back to the employer-sponsored plan since it is tax-advantaged.

These are just a few of the strategies with retirement accounts, however. Let’s move on to the next item.

2. Choose the Right Investments

Choosing the right investments is very important, too. For example, if you invest large sums of money in highly speculative assets, you could find your net worth moving in exactly the wrong direction.

For most investors, a mix of highly diversified stock and bond funds will provide steady long-term growth without being too volatile. However, you may still not know where to start.

One way to invest intelligently without much work is to use a robo-advisor. But even choosing a robo-advisor can be overwhelming these days.

Luckily, there are some that are specifically intended to manage retirement investments, such as Blooom. All you have to do is tell it what percentage of your money to invest in stocks compared to bonds, and the system does the rest.

There are many robo-advisors available today, but most of them can only manage an IRA. Blooom is one of the few that can manage a 401k and other employer-sponsored plans. Check out this Blooom review to see what else this robo-advisor can do for you.

Whether you use a robo-advisor or not, picking the right investments is key to retirement success.

3. Anticipate Higher Expenses

Certain expenses are bound to increase in retirement. Health care costs are one of the big ones. Note that lifestyle inflation, or “keeping up with the Joneses” is not an inevitability.

But more visits to the doctor, more medications, and so on are something most aging individuals encounter. And there are other costs you may encounter as well, such as higher monthly premiums as you age.

There are other policies you may want to consider, too, such as life insurance and long-term care insurance.

It’s not easy, to say the least, to estimate health care costs. However, a study by Fidelity suggested the average retired couple would need about $295,000 of after-tax dollars to cover health care costs in retirement.

These costs make it all the more important to save diligently. If you remain consistent, it should be possible to save enough.

That brings us to our next point.

4. Avoid Lifestyle Inflation

Although it was mentioned in the previous step, avoiding lifestyle inflation is deserving of its own step. Many people fall victim to lifestyle inflation; unfortunately, it can make saving enough incredibly difficult.

Imagine you graduate from college and land a job making $40,000/year. With your modest income, you decide to buy a used car for $8,000.

Fast forward 15 years. You’ve climbed the corporate ladder and are now making $80,000/year. You also need a new car again and decide to purchase a brand-new car for $25,000.

But that’s a great purchase, right? After all, you’re making good money now, and you deserve it.

That is precisely the mindset that leads to lifestyle inflation. You might be making twice as much as you made fresh out of college, and $25,000 isn’t overly expensive for a new car, but it’s three times as expensive as your first car.

In other words, even though you’re making more now, you are also spending a greater percentage of your income on the new car.

The point here is not that you should keep buying $8,000 cars forever. The point is to be more intentional about your choices and to recognize wants vs. needs. If you take a look at the many finance blogs on the internet, your lifestyle can dictate the future of your retirement.

Do you really need a brand-new car? Or would a $15,000 used car do the trick?

There’s nothing wrong with splurging every now and then, but understand that everything is a trade-off. The more you can avoid lifestyle inflation, the easier it will be to save.

5. Stay Consistent

Consistency is absolutely key when it comes to saving for retirement. Unfortunately, many people derail their own strategies due to economic circumstances and other reasons.

If you aren’t an especially high earner, it will be necessary to invest over the course of your career. The investments themselves aren’t difficult, but many people lack consistency.

You may have been tempted to pull all of your money out of the market during times like the Great Recession or the COVID-19 pandemic, but doing so is likely to leave you with less money for retirement.

The biggest problem with pulling money out of the market is the fact that you will likely put that money back in at some point if you want to grow your wealth.

But when do you do that? If you wait too long, you could end up buying back at a higher price. And this is not uncommon, especially for the average investor.

Worse still would be taking money from your retirement account(s) to finance a big purchase, such as buying a house. It can be tempting to do so, especially if you have a Roth IRA, but this is almost never a good idea.

After all, your IRA is an individual retirement account, and that’s what that money should be funding.

Now You’re Read to Retire!

Well, perhaps not quite yet. However, this post should have set you on the right path to having a comfortable retirement.

The first step is to be sure you are funding a retirement plan, and to choose the right investments in it. If you can also stay consistent, avoid lifestyle inflation, and anticipate higher expenses, you should be well on your way to a secure financial future.

Hopefully, you have found these steps helpful and know what you need to do to secure your retirement.