Andrew Crowell: A happy retirement may be easier than you think -- here are baby steps

Retirement might feel like (and actually is) a long way off for many. While you daydream about that “someday,” it can be easy to get caught up in the present, with career, family and your current bills needing attention now.

Oftentimes, retirement doesn’t get much thought. But it really should.

With time on your side, there are numerous little things you can do today to help ensure you get the most out of retirement later.

Develop a written financial plan

Rather than waiting until the 11th hour to find out if you’ve saved enough to enjoy the type of retirement you’ve been dreaming of, why not start the plan early, even simply, and make some assumptions about what you can afford to save and what you think you’ll need for future living expenses?

For a young professional just starting in the workforce, this plan may be a simple spreadsheet that totals how much to save in a workplace 401(k) plan each year to take advantage of a company match opportunity.

For savers further along in their careers or for those who might have families, added expenses like a recent home purchase, school and college costs, car replacements or insurance payments become additional details of the planning process. Rather than naively assuming “I’ll pay for those things out of cash flow,” advanced planning can help inform wise decision-making around these eventualities.

Invest early and regularly

There always seems to be a reason why the present is not ideal to begin investing. Whether your excuse may be “Once I’ve built up a reserve,” or “As soon as I pay off my credit card,” or “Once the kids are out of high school,” it can always be easy to find a delay.

However, the reason “early and regularly” is typically best (even with a relatively small amount of savings), is due to the power of compound interest, or what Albert Einstein called “the 8th wonder of the world.”

Compound interest is simply the process by which savings grows over time because of the interest earned upon interest. This “compounding” effect is a powerful tool which multiplies savings dramatically.

Using a basic online compound interest calculator can easily illustrate that saving diligently for even a few years early on and stopping (but letting it continue to compound) can still result in a larger pool of future savings than waiting to begin saving and trying to catch up later by saving twice the amount for a longer period of time.

The biggest key to harnessing the power of compound interest is starting early.

 Consolidate and pay down debt

Actively pursuing a debt reduction plan during your working years can result in tremendous financial relief during retirement.

Understandably, for many working families, debts mount over time as the timing of important payments can require borrowing. Rather than entering retirement with a mountain of debt, you can begin a process to systematically consolidate, pay off and reduce these debts before a final paycheck.

Protect while you can and it’s less expensive

Protecting your assets such as your health and your hard-earned savings is an important and yet often overlooked step to a happy and less stressful retirement.

For example, obtaining insurance when you’re young and healthy can provide excellent coverage at advantageous rates, which may not be possible later in life. Also, optimizing your “personal lines” of insurance coverage for things like your home and automobiles can protect against unexpected and costly surprises later.


Further, ensuring that financial accounts are properly titled in the optimal savings instruments (for example, a Trust, IRA or charitable lead trust) can add additional protections and peace of mind during the golden years.

Andrew E. Crowell is vice chairman of Wealth Management at D.A. Davidson & Co.