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planning for retirement: 3 simple steps

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  1. Start now.
  2. Invest in something sensible.
  3. Repeat step 2 a lot until you get enough to retire on

start now

If you haven’t got any retirement plans in place, then do something about that today.  None of us are getting younger, and we all need to make plans as soon as possible.

invest in something sensible

Do no invest in something that sounds too good to be true, there is no get rich quick scheme. Of course, some people do get lucky, but whilst I appreciate the vagaries of randomness, I don’t want to rely on it to stop me from working for the rest of my life.

A corollary to this is that sensible is usually boring. Boring is good when it comes to the money.


Keep going. Don’t give up your saving and investing. The more you put in, usually the better off you will end up.

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22 comments for “planning for retirement: 3 simple steps”

  1. “Boring” gets things done, and gets things done without a lot of major mistakes.

    Posted by Lily | January 10, 2008, 1:38 pm
  2. i have to agree with lily’s comment above but…
    i also think it can be a good idea to take a small portion or percentage i should say, of your investment funds and use them in a more speculative way.

    maybe just 5% for the conservative types, not enough to ruin retirement if it goes wrong but a nice boost to the process if you “bet” on the right company.

    BTW…if you get a second i was hoping you could drop me an email too.


    Posted by joel | January 10, 2008, 4:47 pm
  3. I think the best advice is simply the first one…do it Now!

    Posted by Money Blue Book | January 10, 2008, 4:59 pm
  4. Key is to start early. The compounded interest can be unbelievable over 20-30 years.

    Posted by Coupon Fetcher | January 10, 2008, 5:07 pm
  5. As I said on a post on my blog, If you want to gamble, go to Vegas. At least they will comp you a room when you lose!

    It is a marathon and not a sprint!

    Posted by RacerX | January 10, 2008, 5:23 pm
  6. @Raymond and Coupon Fetcher:
    I agree. Earlier is certainly better, and now, is as early as you’re likely to get. Unless you’ve got a time machine handy.

    Monte Carlo would be my gambling destination of choice, but certainly, we’re investors with our retirement money, not speculators.

    Posted by plonkee | January 10, 2008, 6:08 pm
  7. Step 1 & 3 are the hardest. Getting started now is a huge hurdle. Keeping up with it can be a challenge with the bills. Your post is a good reminder. Thanks!

    Posted by Laura | January 10, 2008, 8:46 pm
  8. I’d pretty much agree completely - the earlier you start, the better (it’s all about the compounding!), although with #2 i’d say if you are starting young, you can afford to be a little more adventurous, as you have the time for things to sort themselves out if it all goes wrong - the closer to retirement, the more cautious you’ll need to be.

    Posted by Rob Lewis | January 10, 2008, 10:01 pm
  9. @Laura:
    I completely agree, and that’s why I set up everything to go automagically. If I have to think about it, it won’t happen.

    I think there’s a balance between being adventurous and foolhardy. Certainly you’ve got more time to fix it when you’re younger, but you should always make sure you understand what you’re investing in. Otherwise it really is just gambling.

    Posted by plonkee | January 10, 2008, 11:21 pm
  10. Yep, that pretty much sums it up. I hope that by starting now I will be able to sleep better at night when I am fifty.

    Posted by E.C. | January 10, 2008, 11:28 pm
  11. If you write 200 pages about this post and come up with a neat name for it like Rich Welshman, Poor Welshman or Your Shillings or Your Life you’re going to have a best seller - because that’s basically what every single personal finance best seller says at the end of the day…

    Posted by Brip Blap | January 11, 2008, 3:30 am
  12. I’m trying to learn more about pensions everyday at the moment. The first letter I received in the New Year was a letter from my company telling me that the Final Salary Pension Scheme is being stopped in June and we need to go onto a Career Average Scheme.
    Now for me thats not too good but for all the employees in their 50’s with 30 years service it’s a kick in the guts.It’s going to cost them thousands every year in retirement.
    I think the lesson is don’t rely on anything, you need to take control yourself!

    Posted by nomorespending | January 11, 2008, 7:29 am
  13. @Plonkee - I completely agree - you shouldn’t invest in something that you don’t understand (although that might preclude many from starting a pension in the first place!) but as long as you are aware of the risks, then being a little adventurous when you’re younger makes sense.

    Posted by Rob Lewis | January 11, 2008, 9:04 am
  14. @bripblap:
    Ssssh. You’re leting out my secret plan for personal finance world domination.

    Fortunately, I’m strongly of the opinion that basic pensions aren’t that hard to learn about. But yes, earlier is the time to try being adventurous.

    Posted by plonkee | January 11, 2008, 9:25 am
  15. @Nomorespending: I hate to say it but the trend in the US (the withdrawal of the friendly benefits of the past) is probably going to start being repeated in the UK & Europe. Why voters in Western Democracies allow this dismantling is unclear to me, except that they want cheaper STUFF which means workers have to be paid less which eventually filters back up through labor law changes to the middle class. In the US the support net for old age is disappearing rapidly. My grandparents, who saved a HUGE amount for their retirement hoping to pass an estate on to their family, burned (and are burning) through it all due to health costs and living costs that the government promised to cover through pensions but is closing down one by one.

    @plonkee: I know it’s your plan. As a patriotic American I feel it’s my duty to stand up for my revolutionary ancestors and defend the colonies. Seriously, it is amusing when you think of it. All of these PF writers just take that concept and apply clever phrases or slogans to it and voila! bestseller. And you gave it away for free! :)

    Posted by Brip Blap | January 11, 2008, 11:38 am
  16. In the UK, at least, the most recent round of closures to final salary schemes is basically because they are underfunded, and it will take a lot of contributions to bring them up to the required levels - especially as rules are now stricter.

    I get the impression, that retirement is a lot more expensive than people (the ones that are supposed to know) used to think. Someone has to pay for it and take on the risk, but for a final salary scheme, that implies huge contributions (either from employer, employee or both) for no extra retirement benefit to the employee. Difficult thing to sell to either side, when you could just close the scheme.

    Posted by plonkee | January 11, 2008, 12:20 pm
  17. @Brip Blap. I really take issue with the ‘government promised us pensions’ line. In the past, more people wore themselves out through manual work, and medical science wasn’t so advanced, and as a consequence, the average mortality age was much lower. The pension promise was only ever expected (and costed) on the basis of a few years of payment.
    What’s happened is that suddenly people are living decades on retirement, (particularly as a recently-retired generation decided to retire early) and that hasn’t been funded.
    So those of us still in work are seeing our pensions eroded to pay those costs, by raised retirement ages (my retirement age went up 3.54 years overnight), reduction of final salary schemes, etc.

    Posted by Pippin | January 11, 2008, 1:51 pm
  18. @Pippin:
    My current favoured solution is to guilt the generations younger than me into paying for state pensions. Just like I’m paying for the pre-war and war babies and I’ll be paying for the boomers. I’m not saying it’ll work - but it seems to be working on us.

    Posted by plonkee | January 11, 2008, 2:04 pm
  19. @Plonkee - kinda, but not really. pensions have always been dependent on the generation below paying for the generation above. But as you say, we aren’t carying the burden of one generation, we are funding 2 or 3. Oh, and we’re also been expected to fund our own through our own means, ultimately meaning we’re paying for our parents and g-g parents to lead far more privileged lives than we’ll ever benefit from.

    There are occasional hints of a generational fightback- I wonder if it’ll happen?

    Posted by Pippin | January 11, 2008, 2:55 pm
  20. Great advice Plonkee - couldn’t have said it better myself. And certainly not in so few words!!


    Posted by Four Pillars | January 12, 2008, 4:20 am

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