Bringing Simple Back to Retirement Planning

Simple may not sound sexy or impressive to those looking from the outside and measuring your success, but the trappings of simplicity are truly priceless. They provide peace of mind and the ability to breathe deep and enjoy life. Below are several simple concepts to consider for your personal finances.

[Read: How to Become a Millionaire by Retirement.]

Consolidation. As we move through the various stages of life, we tend to carry baggage from the previous stage into the current stage. Many people have a patchwork quilt of complicated financial statements from various jobs, rather than a well oiled machine helping them move toward financial independence. You can make your financial life much easier by not leaving behind breadcrumbs of financial days past. If you have not been staying on top of it, consider consolidating all of your old employer-sponsored retirement accounts, including 401(k)s, 403(b)s and SIMPLE IRAs. You also want to make sure that, as you review your accounts, the beneficiaries reflect your current desires, not your desires from 20 years ago. Make sure your chosen heirs accurately reflect new marriages, divorces, births and deaths.

Don't be a faker. Instead of acting your age, aim to act your wage. Better yet, act about 75 to 80 percent of your wage. Living below your means seems like a no-brainer, but many successful individuals fall prey to keeping up with the Joneses or over-rewarding themselves for career, income or status achievements and actually ending up being victims of their own success. Do what is financially smart and simple instead of what your station of success leads you to believe you are supposed to do.

Many second homes are purchased because "that's what successful people do". However, a number of these newly-minted vacation home owners fail to recognize the expense of management companies, unoccupied winters and never ending maintenance because renters don't treat property like they own it. This is not to suggest that a vacation home or second property doesn't make sense for you, but make sure you understand exactly what you are buying, why you are buying it and that the rest of your financial house is in order before you do.

[See: 10 Ways to Repair Your Retirement Finances.]

Cover the basics. Make sure your finances have a strong foundation. The financial planning order of operations is not all that complicated when it comes to making sure you have the basics of your financial house in order. Follow these simple steps:

1. Make sure you have adequate cash reserves. This should cover three to six months of living expenses.

2. Make sure you have accounted for unexpected life events. Estate documents (wills and health care directives) will make sure the kids and money end up in all the right places. Your insurance policies (term life and disability insurance) will provide in the event you are not here or able to provide in the same capacity for your loved ones.

3. Save 15 to 20 percent of your gross (before tax) income for retirement. If you can set yourself up to defer about 20 percent of your wages for your future needs over the course of a working career, your future self will thank you. If you are a little behind or late to the game, do what you can to try to improve over time. Forced scarcity and paying yourself first are great ways to train yourself to become an effective saver.

4. Keep an eye on outflows. If you can make sure to keep fees and taxes in check, you are already ahead of the game. Both your asset allocation and your asset location impact how much you will pay in taxes. Don't leave any deductions or credits on the table like health savings account contributions and charitable contributions. You also need to monitor your investment holdings and their expense ratios to keep your costs down. Outside of your portfolio, make sure you are reviewing the cost of the services you use, such as internet and TV providers and utility companies, and consider switching providers or negotiating for a lower rate if you find a better deal.

[See: 10 Costs You Can Eliminate in Retirement.]

While it is inevitable that sometimes life will get busy, that does not mean that we have to let it become unnecessarily complicated. Some decisions we make take us off target from our ultimate goals, such as buying a beach house or sports car in lieu of saving for retirement. Our financial priorities also change as we switch jobs, move, get married and have kids. It is important to periodically recalibrate, refocus and realign our financial lives to help reach our ultimate goals. Sometimes the best way to do this is to bring simple back.

Brian Preston and Bo Hanson are fee-only financial planners who host the podcast, "The Money-Guy Show".