How to prepare financially for retirement is a question many people wrestle with regularly. The truth? There is no one-size-fits-all answer.

Preparing for retirement is perhaps the most important act you can take in securing your financial future, but it’s also something that’s unique to your situation. And the most important step of the process is getting started as soon as possible.

Each person’s retirement strategy greatly depends on their age and current financial status, but there are a few broad pieces of advice that will apply to most people. To get started on the right path to a comfortable retirement, we suggest following these three steps:

  1. Pay down any high-cost debt you have early. Many people are living with some type of debt, though that’s not necessarily a bad thing. What matters is identifying and characterizing the type of debt you carry and then acting aggressively if it’s the sort of debt that you need to pay off as quickly as possible.

Consider a mortgage, which is likely the most significant debt you’ll ever incur. With interest rates at historic lows, it’s possible to get a 30-year fixed-rate mortgage at 3.0% or lower. Taking on hundreds of thousands of dollars of debt is nothing to scoff at, but it can still be a good investment if borrowing that money allows you to buy a home.

At the other end of the spectrum is credit card debt. Data released by the Federal Reserve Bank of New York revealed that credit card debt reached a record of $930 billion in the last quarter of 2019. Credit cards usually offer interest rates of 25% or higher, which can cost you a fortune if you maintain a consistent debt balance over time. Whenever the interest rate on debt is higher than what you might expect to earn with a reasonable, long-term investment, you should prioritize paying down that debt.

  1. Save, save, save. Income is a powerful resource. However, its value can deteriorate if you’re not making sound financial decisions and setting money aside for the future.

An aggressive saving strategy early on can open up valuable options as you get older, but don’t despair if you feel like you haven’t been saving enough. The most important thing you can do is start saving right now.

Once you’ve decided to build an emergency fund, the next step is deciding where to put that money. Retirement accounts like IRAs and 401(k)s  allow you to defer taxes on employment income and investment income until retirement. If you opt for the Roth designation, you can grow your money and withdraw it in retirement without paying additional taxes. There are pros and cons to each approach, but a Roth is usually a good idea if you expect to be in a higher tax bracket as you get older.

  1. Be smart with your investments. Just saving your money isn’t likely enough to see you through a comfortable retirement — and that’s especially true given today’s low interest rates. Saving and investing go hand in hand, and solid practices on both fronts can help you achieve your retirement goals.

There are many investment opportunities available. Looking at your specific goals with respect to your current financial status, can help you identify the investments that may provide the kind of retirement you want.

Age also factors heavily into an investor’s portfolio because it directly affects risk tolerance. An investment portfolio that’s heavily skewed toward stocks could lead to a higher return, but a downturn in the market right as you reach retirement age could cause the value of your savings to plummet.

Withdrawing money in this situation could cost you. As a result, you’ll want to assess risk carefully as you age, perhaps reducing your allocation to stocks as you reach your 50s.

There’s far more to retirement than we could cover here, but we hope we succeeded in getting you to think strategically about preparing for retirement and making sound financial decisions. If you think it might be easier to work with professionals to make those decisions and manage your assets, be sure to read our thoughts on specific considerations to keep in mind as you seek the right wealth management firm.

This commentary is prepared by Pekin Hardy Strauss, Inc. (dba “Pekin Hardy Strauss Wealth Management”, “Pekin Hardy”) for informational purposes only and is not intended as an offer or solicitation for the purchase or sale of any security. The information contained herein is neither investment advice nor a legal opinion. The views expressed are those of the authors as of the date of publication of this report, and are subject to change at any time due to changes in market or economic conditions.  Pekin Hardy Strauss Inc. cannot assure that the type of investments discussed herein will outperform any other investment strategy in the future. Although information has been obtained from and is based upon sources Pekin Hardy believes to be reliable, we do not guarantee their accuracy.  There are no assurances that any predicted results will actually occur.  Past performance is no guarantee of future results. The S&P 500 Index includes a representative sample of 500 hundred companies in leading industries of the U.S. economy, focusing on the large-cap segment of the market.