Investing for Retirement? 5 Things to Do

By Fergus Cleaver

Who doesn’t dream of retiring early? Anyone who tells you they’d pass up the chance to cut ties with the workaday world while still in their prime probably has a bridge to sell you. (Come to think of it, maybe that’s their retirement strategy!)

The sad truth is that financial reality usually intervenes with our best-laid early retirement plans. Unless you’re fortunate enough to win the lottery, invest in the next unicorn startup, or find yourself in one of the very few careers that virtually guarantees independent wealth, you’re not likely to earn enough to quit your 9-to-5 and spend the rest of your days splurging.

But comfortable, reasonably early retirement is within reach for the vast majority of middle class wage-earners and salaried workers. And there’s really no secret sauce. What separates those who live out their golden years in prosperous comfort and those who toil away until they’re too old to make it any longer is a pedestrian combination of discipline, advance planning, smart (but not brilliant) financial decisions and a knack for avoiding common retirement investment mistakes.

Not sure where to start? Follow these five tips to start your retirement investing journey off on the right foot.

1. Know What You Need

How do you know how much you need to retire? That’s a very complicated question best discussed with your financial adviser. Generally speaking, you want your post-retirement lifestyle to approximate your pre-retirement lifestyle. That doesn’t mean you need to replace your peak income, as you can make up the difference by downsizing your life or cashing out your retirement account over time. But you can’t go into retirement without a sizable nest egg to draw on over what’s (statistically) likely to be two to three decades.

2. Scrimp, Then Scrimp Some More

Here’s a revolutionary concept: Don’t spend more than you earn. Actually, spend a lot less than you earn. Simple.

3. Don’t Try to Knock It Out of the Park

Those legendary stock picks? They’re legendary for a reason. Stick to safe, boring investments—index funds, annuities, bonds and the like. You simply don’t have the time or expertise to craft a get-rich-quick investing strategy, no matter how alluring it appears.

4. Hustle on the Side

When in doubt, increase your income. Whether that means tapping a little-known skill in the wide world of digital talent marketplaces, or buying an investment property that earns consistent rental income, is for you (and your financial adviser) to decide. Just remember: A little extra money never hurt anyone.

5. Stay Out of Debt

Not all debt is created equal. No one’s saying you shouldn’t finance the purchase of your forever home, but if you’re serious about maximizing your earning and saving power, you need to avoid the sort of “junk debt” that can derail your financial plan faster than you ever thought possible.

For starters, avoid payday loans, which serve virtually no positive purpose. And, unless you have a very good reason for racking up credit card debt, avoid that too. Even a modest credit card balance can needlessly accrue hundreds of dollars in interest charges each year—money that won’t flow into your retirement account.