Planning for retirement can seem complicated, intimidating and completely overwhelming at first. But by taking just a handful of small, simple steps, anyone can pave a path to the retirement of their dreams.
In a blog post this week, Nigel Green, founder and CEO of deVere Group, recommended all retirement planners focus on what he calls his “SIT process.”
SIT stands for saving, investing and being tax-efficient.
The three-step process may seem simple, but Green says he sees a surprising number of retirement planners who are underestimating what it takes to retire comfortably.
Following The SIT Process: The first step in the process is to make sure you are saving a portion of each paycheck. Green said one of the most common mistakes of retirement planning is not saving enough in the first place. It may seem like there is plenty of time to save more in the future, but Green pointed out that there are only about 120 paydays every decade.
The next step in the SIT process is investing. Unless you anticipate a large inheritance, Green said it’s very difficult to retire comfortably on savings alone. He said a properly diversified and monitored investment portfolio is a must-have for most retirement planners.
“Financial markets are always fluctuating, but history teaches us that over the longer-term their performance is consistent; they almost always go up,” Green said.
For example, despite the 2009 financial crisis and the 2020 global pandemic, the SPDR S&P 500 ETF Trust (NYSE:SPY) has generated a total return of 272.7% over the past 20 years.
The final step in the SIT process is to make sure you are being tax efficient with your finances. By investing in tax-deferred retirement accounts and being strategic with asset sales and transactions, Green said there are plenty of completely legal ways to save a tremendous amount of tax dollars in the long-term.
Be Prepared: Green said long-term retirement investors should be prepared for a new normal in the post-pandemic world that will likely include rising geopolitical tensions, negative interest rates and other unpredictable financial hurdles.
“Despite the world being upended in recent months, I believe that should people stick to the SIT principle, they will be well on track to retiring comfortably,” he said.
Benzinga’s Take: The SIT process is one of many excellent approaches to planning for retirement. There are plenty of ways to effectively plan and prepare for retirement, but the strategies only work if they are followed consistently over time.