Improve your retirement readiness

5 steps include minimizing taxes, cutting spending

While the “Trump rally” has lifted U.S. stocks and given a boost to the typical 401(k) account, don’t count on riding this bull market to financial security in retirement. My advice: take the following steps to best ensure your retirement readiness.

Save more. It’s hard work building up enough savings to afford to live comfortably in retirement. In fact, if you turned 65 today, you’d need nearly $1,000,000 to purchase an annuity that will pay you $5,000 a month until you die. Your goal should be to save at least 10% of your pay toward retirement throughout your working lifetime. If you need some help getting there, consider utilizing a tool your retirement plan offers called autoescalation, which boosts your annual savings rate 1% per year without you lifting a finger.

Spend less. An easy way to spend less is to investigate your retirement investment expenses and eliminate those that are clearly not adding value. We see people paying way too much for underperforming funds and managed account services. Look for an index fund alternative to replace a persistently underperforming fund. I have yet to find a managed account service that outperforms the best off-the-shelf target date retirement fund alternative.

Another way to spend less so you can save more is to inject some discipline into your daily finances by creating a budget. Know how much you can afford to spend each month on everything from food to entertainment and stick to it. Consider using new technology such as Mvelopes.com to track your credit card expenditures and warn you when you are nearing your monthly limit. Or try the alwayspopular low-tech method of occasionally leaving your debit and credit cards at home and pay cash.