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6 Steps to the Retirement Lifestyle You Want

Scott Holsopple

Becoming a successful retirement planner doesn't necessarily require millions of dollars. However, it does require you to reach retirement having saved the appropriate amount of money to live the retirement lifestyle you envision.

Individuals expecting to travel the world golfing, fishing, visiting spas and eating at five-star restaurants will require a lot more money to be successful at retirement planning than those who plan to stay near home and spend their time exercising, cooking and enjoying a leisurely lifestyle. How can you ensure you're able to live the lifestyle you want during retirement? Whether your retirement plans are elaborate or simple, there are six things successful retirement planners should do. Follow these steps and you'll be on your way to a successful retirement:

1. Create a retirement saving and investing strategy. Here are three questions you need to answer:

--What kind of investor are you? What's your risk tolerance? How long do you plan on saving for retirement? Considering these questions will help identify what kind of investor you are and guide you as you determine the best investments for you and your situation. Are you an aggressive investor? A mix of 80 percent stocks and 20 percent bonds might be best for you. Are you more on the conservative side? You might want to look into a 50-50 split.

--What are your estimated monthly income needs in retirement? The general rule of thumb states you'll need at least 70 to 80 percent of your pre-retirement income to maintain your standard of living during retirement. Online calculators or an investment advisor can help you come up with a number. Detail-oriented budgeters can calculate a more precise amount using anticipated monthly expenses and accounting for big-picture annual expenses such as travel. Remember to include inflation in your calculations.

--How much money do you need to have saved on the day you retire? This will be based mainly on your desired monthly income and your anticipated life expectancy.

You may want to compare how the 4 percent withdrawal rule stacks up with an anticipated retirement length of 20 to 25 years. This should help you determine how much you will need to have saved. I recommend you overestimate so you don't outlive your retirement savings.

Now that you're armed with this information, you can determine how much you need to save to reach your retirement goal and what kind of investments will help you get there. Your strategy should include your current and future savings rates and a plan for how you'll increase that number over time. Because compounding interest is such a powerful tool, you'll want to save as much as you can as early as you can.

2. Make your retirement savings a top financial priority. Here comes the dreaded b-word: budget. Depending on how much you're already socking away, you might need to rearrange your budget so you can afford to increase your contribution level. You might consider eating out less, eliminating cable or even taking on some freelance work - whatever you have to do.

3. Create a general savings account and pay yourself first. Your 401(k) contribution is automatically deducted from your paycheck. Use the same model and create an automatic deposit to your general savings account each payday. People with healthy savings in the bank are better able to cope with emergencies and can avoid dipping into retirement savings. By making it automatic, you are less tempted to skip saving that month.

4. Avoid unnecessary debt. People who bite off more than they can chew expense-wise can spend years or even decades wading through that debt. All the while, they aren't able to save for retirement at the level they should. Pay credit cards off in full each month. Resist the urge to overspend on big-ticket items like homes and cars.

5. Pay debt off more quickly than required. If you have student loans, credit card balances, car payments or other debt, arrange your budget so you're paying more than the minimum monthly payment. You'll lessen the amount of interest you pay in the long run and will eliminate debt more quickly. Once you're not weighed down by the extra debt, you'll be able to save more for retirement.

6. Make the math work. The last thing you want is to be surprised at retirement because you don't have enough money. If the math doesn't add up, find a way to change the equation. If you can't currently save the amount needed to reach your retirement goal, you need to spend less money, make more money or adjust your retirement expectations. This could mean retiring later, continuing to work part-time in retirement or adjusting your planned retirement lifestyle.

This isn't an all-inclusive list by any means, but it's a good start. While a successful retirement might look different for everyone, it's likely that most investors get there the same way: by devising a plan, putting said plan into action and following it through. Put these basic steps into action and you'll be well on your way toward living the retirement you've always dreamed of.

Scott Holsopple is the president of Smart401k, offering easy-to-use, cost-effective 401(k) advice and solutions for the everyday investor. His advice has been featured on various news outlets, including FOX Business, USA Today and The Wall Street Journal.

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