5 Things you can do to prepare for retirement

Jun 30, 2010 at 11:10 p.m. ET

The term retirement may conjure up visions of you and your gray-haired spouse strolling in a park sometime in the distant future, but don't be disillusioned. No matter what your age, you must plan for retirement because it comes up faster than you realize! Planning for the future involves putting solid strategies into place to reach your goal. Don't put it off; the most important thing is to simply begin. Here are five basic considerations to get you started preparing for retirement.

Couple planning finances

Plan your route

Peggy Bergan of Vineyard Financial Group in Scottsdale, Arizona, says the first thing you should do is write down your goal; put it in writing so you can see it. "I like to compare our future to a road trip. You don't just get in the car and go. You decide where you're going and then prep, pack and plot your route." Peggy uses the SMART method: Specific, measurable, attainable, realistic and timely. "As a planner, it's easier for me if the client has some idea of where she wants to end up. My plan will be significantly different if we're planning for retirement in a log cabin sitting in a porch swing or living in a large home and traveling in the lap of luxury."

Check your social security statements

If you have ever worked and paid into the Social Security system, you should be receiving annual statements. Most people barely take notice of anything but the bottom line of how much their monthly check will be at retirement. While this is important, equally important is what the record of earnings reflects. Check for any discrepancies of reported income against your tax records. It's much easier to get it corrected after one or two years than after 10 because you will be required to produce proof of income.

Use your employer's 401(k) plan match

Thanks to the benefits of tax deferral and automatic savings, your retirement account balance can grow faster than you previously thought possible. Many employers match up to a certain percentage of contributions. If your employer matches dollar for dollar, this is a 100 percent return on investment. You can't get those returns in Vegas!

Roth IRAs

You should be investing in your 401(k) plan only up to the point where your employer matches. After that point, put those funds into an IRA. Typically, savings accumulated in a Roth are tax free when it comes time to withdraw. When you change employers, consider rolling your 401(k) to a Roth. There are contribution limits that are based on earned income levels. To check out what those are, visit the IRS website.

Keep out of your retirement fund

Can't handle the mortgage? That's still not a good reason to dip into your retirement funds. Consider the fact that, when that money runs out, you still might be facing foreclosure, but you'll also face a big goose egg in your retirement account. Curb your impulse to withdraw from this account, or you'll be faced with early withdrawal penalties, and you'll lose out on potential future gains as well.

Implement these basic strategies to get on the road to retirement -- and to your vision of that now peaceful stroll with your gray-haired spouse!

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