Preparing for retirement at any age is so much more than planning for yourself when older — it requires due diligence in the years leading up to that milestone.
Retirement tip of the week: Take a moment to conduct a financial “check-up” of yourself, not just to know where you stand now, but how your habits and current position could affect your retirement down the road.
One way to start this process is by keeping records and updating them regularly.
Margaret Gooley, a certified financial planner at Worley Erhart-Graves Financial Advisors, recommends creating a personal financial statement with all assets and liabilities. “It can help to track progress toward long-term goals and help ensure people don’t lose track of various accounts,” Gooley said. “It doesn’t take too long to make a simple personal financial statement using a spreadsheet, and this is a great step toward long-term financial fitness.”
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Financial planners conduct this practice with clients, but anyone can do it at home. “Generally, total assets should be increasing and liabilities should be decreasing (or at least growing slower than assets),” said Michael McDaid, a certified financial planner at RetirementDNA. “If not, they should understand why. Maybe the market is down or credit card balances are up. Either way, they should be asking themselves if there is something they can/should be doing differently to improve their net worth.”
But there’s so much else to consider during a financial check-up, which will help later in life. This includes:
- Reviewing life, disability, home and auto insurance policies to ensure they’re up to date and include enough coverage.
- Establishing estate documents, including powers of attorney, healthcare proxies and guardians for minor children.
- Creating an income statement, which incorporates income and expenses and determines if there is any surplus that can be used towards financial goals — or if there’s a shortfall, an opportunity to cut back where possible.
- Checking on beneficiaries listed for various accounts.
- Analyzing credit and debit card statements to see if money is being allocated properly. Ask yourself “are there any subscriptions you no longer use? Any expenses that don’t actually bring you that much joy?” said Glenn Downing, a certified financial planner and founder at CameronDowning. You may be able to get your mobile or cable provider to help you lower your rates.
- Evaluating your emergency fund.
- Creating a “my Social Security” account online, which allows individuals to check their work history and confirm all the information the Social Security Administration has on file is correct. Having a Social Security account also allows people to detect fraud, which could affect retirement benefits, said Michelle Petrowski, a certified financial planner. “Check your account to ensure no one has already created an account in your name and may even be taking benefits under your Social Security,” she said.
“Additionally, just looking really deeply at one’s self, especially if you have many years ahead that you could work and really assess your own human capital,” said Matthew McKay, a certified financial planner and investment analyst at Briaud Financial Advisors. “Where you are today and the ways at which you can increase that.”
Above all else, have a financial plan — even if it’s just writing down your goals. “It becomes far easier to decide how much money to save and exactly where to put it,” said Sean Pearson, a certified financial planner and associate vice president with Ameriprise Financial Services.
Want more actionable tips for your retirement savings journey? Read MarketWatch’s “Retirement Hacks” column