It’s Your Money Column – Strategies to Build Toward a Successful Retirement

Just a few years ago, many of us had our retirement dreams firmly in place. We were going to be able to retire earlier than we thought. Then the financial boom turned sour. Although retirement may have been pushed back, there are strategies to take to make it happen.

According to Ray Price in BottomLine Personal, "Based on my counseling experience, the people who stick with their plans and retire comfortably have similar traits." Following are some of those traits.

• Both spouses agree on the same retirement dream and have a low level of debt and no credit card debt.
• Only after couples spend money toward their financial goals do they reward themselves; for example, by going out to dinner or taking a vacation.
• Their common goals lead naturally to strategic financial habits.
• They save at least 10 percent of their gross income annually. (In retirement, you’ll need annual income equal to 70 percent to 80 percent of your current salary and possibly more. If you’re now between the ages of 35 and 40 and haven’t saved a nickel, you’ll need to save at least 15 percent of your annual income.)
• They contribute the maximum to their 401(k), 403(b), Keogh and/or SEP retirement plans. They also fully fund other tax-advantaged investments, too, such as IRAs.
• They reprioritize their spending. Most people spend far too much of their income on short-term satisfaction, such as restaurants, clothes and movies.

Price recommends that people focus on long-term spending goals that redirect some current spending toward lifelong security. Following are more examples of how to save for retirement.

Don’t lease a car unless it’s for business. Leasing is a status trip and a waste of money. Drive a vehicle for at least four years after it’s paid off. You will soon save enough to buy your next car for cash.

Put your investment spending on automatic pilot. Spend less on elaborate vacations and trendy clothes. Have savings automatically transferred to an investment account every month.

Control your mortgage. Early retirement is much easier if your home is paid off. If you intend to retire early, get a 15-year mortgage with a lower interest rate. While monthly payments are higher, more of your money will go toward the future rather than the present. If you have a 30-year mortgage and it makes no economic sense to refinance, cut the loan term in half by adding an extra principal payment every month – or simply pay an extra $100 a month on a 30-year, $150,000 mortgage and you’ll slash its term to 22 years.