Originally published by Investopedia
Written By: DENISE APPLEBY

Almost all of the research conducted on the subject over the last few years shows that most individuals are unable to demonstrate financial security; particularly for their retirement years. This only underlines the fact that achieving financial security is a challenging process that requires careful planning and follow-through.

To be sure, financial security means different things to different people. But we'll use a simple definition: having enough financial assets to cover your expenses, emergencies, and retirement without having any concern of running out.

Below, we review some helpful tips that should help you on your way to achieving financial security.

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1. Start as Soon as You Can
It is obvious that it is better to start saving at an early age, but it is never too late to start—even if you are already close to your retirement years—because every penny saved helps to cover your expenses.

If you save $200 every month for 40 years at a 5% interest rate, you will have saved significantly more than an individual who saves at the same rate for 10 years. However, the amount saved over a shorter period can go a long way in helping to cover expenses during retirement.

Also, keep in mind that other areas of financial planning, such as asset allocation, will become increasingly important as you get closer to retirement. This is because your risk tolerance generally decreases as the number of years in which you can recuperate any losses goes down.

2. View Savings Deposits as a Bill
Saving on a regular basis can be a challenge, especially when you consider the many regular expenses we all face, not to mention the enticing consumer goods that tempt us to spend our disposable cash.

You can guard this temptation by treating your retirement savings as a recurring expense, similar to paying rent, mortgage, or a car loan. This is even easier if the amount is automatically debited from your paycheck by your employer.

If the amount is deducted from your paycheck on a pre-tax basis, it helps to reduce the amount of income taxes owed on your salary.

Alternatively (or in addition), you may have your salary direct-deposited to a checking or savings account. You can also have the designated savings amount scheduled for automatic debit to be credited to the retirement savings account on the same day the salary is credited.

3. Save in a Tax-Deferred Account
Contributing amounts earmarked for your retirement to a tax-deferred retirement account deter you from spending those amounts on impulse because you are likely to face tax consequences and penalties.

For instance, any amount distributed from a traditional retirement account may be subject to income taxes the year in which the distribution occurs, and if you are under age 59½ when the distribution occurs, the amount could be subject to a 10% early distribution penalty (excise tax).

If you have enough income, consider whether you can increase the amount you save in tax-deferred accounts. For instance, in addition to saving in an employer-sponsored retirement plan, think about whether you can also afford to contribute to an individual retirement account (IRA), and whether the IRA should be a Roth IRA or a traditional IRA.

4. Diversify Your Portfolio
The old adage that tells us that we shouldn't put all of our eggs in one basket holds true for retirement assets. Putting all your savings into one form of investment increases the risk of losing all your investments, and it may limit your return on investment (ROI). As such, asset allocation is a key part of managing your retirement assets. Proper asset allocation considers factors such as the following:

Your age: This is usually reflected in the aggressiveness of your portfolio, which will likely take more risks when you're younger and fewer the closer you get to retirement age.
Your risk tolerance: This helps to ensure that, should any losses occur, they occur at a time when the losses can still be recuperated.
Whether you need to have your assets grow or produce income.
5. Consider All Potential Expenses
When planning for retirement, some of us make the mistake of not considering expenses for medical and dental costs, long-term care, and income taxes.

When deciding how much you need to save for retirement, make a list of all the expenses you may incur during your retirement years. This will help you to make realistic projections and plan accordingly.

6. Retirement Savings Is a Must
Saving a lot of money is great, but the benefits are eroded or even nullified if it means you have to use high-interest loans to pay your living expenses.

Therefore, preparing and working within a budget is essential. Your retirement savings should be counted among your budgeted recurring expenses in order to ensure that your disposable income is calculated accurately.

Retirement Age
According to Gallup, the average American will retire at age 66 and live until nearly 79.

7. Periodically Reassess Your Portfolio
As you get closer to retirement and your financial needs, expenses, and risk tolerance change, strategic asset allocation must be performed on your portfolio to allow for any necessary adjustments. This will help you ensure that your retirement planning is on target.

8. Optimize Your Expenses
If your lifestyle, income, or fiscal responsibilities have changed, it may be a good idea to reassess your financial profile and make adjustments where possible, so as to change the amounts you add to your retirement nest egg. For instance, you may have finished paying off your mortgage or the loan for your car, or the number of individuals for which you are financially responsible may have changed.

A reassessment of your income, expenses, and financial obligations will help to determine if you need to increase or decrease the amount you save on a regular basis.

9. Consider Your Spouse
If you are married, consider whether your spouse is also saving and whether certain expenses can be shared during your retirement years. If your spouse hasn't been saving, you need to determine whether your retirement savings can cover not only your expenses but those of your spouse as well.

10. Work With a Financial Planner
Unless you are experienced in the field of financial planning and portfolio management, engaging the services of an experienced and qualified financial planner will be necessary. Choosing the one who is right for you will be one of the most important decisions you make.

Financial Security FAQs
How Much Money Do You Need to Be Financially Secure?
That depends on your age, income needs, and financial objectives. But generally speaking, the "4% rule" is a good measure of financial security. In other words, if you're able to safely withdraw 4% from your investment accounts every year and never run out of money, it's probably safe to say you are financially secure.

What Is the Difference Between Financial Security and Financial Stability?
Broadly speaking, financial stability means being free of debt and being able to comfortably pay off monthly expenses (with plenty left over for savings).

Financial security, on the other hand, means having enough money to cover your expenses, emergencies, and retirement without the fear of running out.

How Can You Protect Your Financial Security?
The best ways to protect your financial security include:

Continuing to live well below your means
Remaining prudent when it comes to investing
Establishing different streams of income
Capitalizing on opportunities when they arise
How Can I Be Financially Free in Five Years?
In order to be financially free in five years, consider the following steps:

Figure out your baseline level of revenue and expenses
Cut your expenses as aggressively as possible
Pay down as much debt as possible
Boost your income with a second job or side business
Ratchet up your monthly savings rate to 75% or greater
Invest in a way that prioritizes growth assets
The Bottom Line
What we've discussed here are just a few of the factors that may affect the success of your retirement plan and determine whether you enjoy a financially secure retirement. Your financial planner will help you to determine whether you should consider other factors.

https://www.investopedia.com/articles/retirement/06/10secureretirementtips.asp#toc-the-bottom-line

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