No. of Recommendations: 25
but a little planning now may save me a lot of grief later.

The biggest, most important thing you can do is:

SAVE!

The next biggest thing you can do is:
Don't be stupid. There is no free lunch. You will not get rich quick by investing with some super-secret method.


It sounds to me like you are stuck in analysis paralysis. The major obstacle to retirement analysis is predicting the future. When you start to lay out formulas and figures and put together plans, you'll discover that the most important factors - those that have the biggest impact on the analysis - are the guesses about the future.

Here's a couple common ones:

Traditional IRA (or 401k) vs. Roth IRA contributions. This hinges on your tax rate in retirement. If you rate is higher now than in retirement, use the 401k and/or traditional IRA. If your rate now is lower than in retirement, the Roth is the optimal choice. But what will your tax rate be in retirement? At it's core, all you can do is guess. You can (and should!) make educated guesses. But life (and Congress) can throw you curveballs and change things. Typical retirees who will depend heavily on Social Security in retirement will have a lower rate in retirement and should go for the traditional IRA/401k. Those who save a lot more than they might really need are likely better off with a Roth.

Social Security. Ray correctly points out that taking SS at 62 vs waiting to 70 is statistically the same. And it is - over large groups of people. But you are not a large group - you are one person. There is a small chance that you'll live to the statistically average age. There's a much better chance that you'll live longer or shorter than average. So you have to guess how long you will live. If you will live to 100, you're better off waiting to 70 to start benefits. If you will die at 64, there's no point in waiting to 65 to start collecting. So you have to make an educated guess. How is your health? How closely do you monitor your health? What is your family history of longevity? And another issue is: How important are SS benefits to your retirement? Do you need to maximize benefits to have enough to eat? Or will those benefits be merely a footnote in your retirement income?

Few of these kinds of questions will be black and white. And virtually all are on a sliding scale. Sometimes it's easier to consider the risks of a mistake. How bad will things be by making the wrong choice? If the wrong choice still leaves you with a good retirement, then there is no wrong choice, just a good choice and a better choice. Don't spend a lot of time fretting about those choices. Instead focus on the more critical areas.

And I believe the two most critical areas for virtually everyone are the ones at the top of this post. Save. And don't take stupid risks chasing some fantasy.

--Peter
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