1. Start investing early
The earlier you start saving; the more compound interest can working for you. For each year you delay saving, the higher your monthly contribution will need to be to achieve the same targeted amount. The law of compound interest shows that starting in your 20s means it will be a lot easier to be wealthy; however, if you are just getting started – don’t despair.
2. Make additional savings
Whenever you save on a major expenditure, you should put part of that savings into your retirement. Get in the habit of putting half of the savings on the “great deal” at the store into your retirement account. If the recliner is $100 off this month, put $50 into your long-term savings account. This will help to reduce impulse purchases on “great deals” and it will also help you grow your savings even more quickly.
3. Keep up with inflation
Your monthly contribution to your retirement account will diminish in real terms over time if you don’t adjust your contributions in line with inflation. This will result in you contributing less than you think you. Investing more, as well as investing slightly more aggressively, could lead to an even higher return over time.
4. Expose yourself to growth assets
To keep pace with inflation, you will need a certain allocation in growth assets, such as equities, in your portfolio – even post-retirement. I advise people to follow the investment strategies of my book, The Confident Investor, well into their 70s if not 80s. Assume you will outlive the oldest person that you know right now.
While the majority of your income should be in direct equities using my Watch List as a guide, you should have 20-40% of your portfolio in index funds. These index funds should be a small cap, large cap, bond, and international.
6. Stick to your investment strategy
I strongly suggest that you follow my Grow on Other People’s Money strategy. However, if you don’t feel comfortable with that strategy, find one that works for you and stick with it. Nothing will destroy your portfolio more than panic selling.
7. Look after your health
You should prioritise health and medical care when saving for retirement as medical costs can form a large percentage of a retiree’s spending. It’s well documented that medical inflation is much higher than general inflation. Nothing is enjoyable without health, so staying active and doing everything you can to stay healthy should be a priority at any age.
8. Keep active and interested in life
Retirement options aren’t what they used to be. These days retirees are opting to start new businesses and even further their studies. These activities can give meaning and purpose to your golden years while allowing you to continue playing a role in the economy. The message is clear – don’t stop planning, working or dreaming.
9. Read about the market
You have already started this habit if you are reading this site. Read my book as well and other books on investments. You should never stop learning.
10. Take responsibility
No one said it was going to be easy. But you can do a lot for yourself by taking an active interest in your investments, reading and staying up to date on the markets. Products change and sometimes investment views change too. So be informed, ask questions and take control of your future, starting today.
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