Retirement planning is crucial if you want to enjoy your retirement. It could be one of the biggest challenges you might face, but you also don’t want to be ill-prepared for it. Many people make grave financial mistakes and end up regretting things when they should be enjoying their hard-earned money. You don’t want that to happen to you.
On the other hand, some retirees are having the time of their lives during their retirement. They started planning earlier for it and made informed decisions. They’re now reaping the fruits of their hard work. This group is the one to aspire for in the future.
Retirement planning is indeed a smart thing to do. Don’t know where to start? Here are three major tips for starters:
1) Identify Your Retirement Needs
Sometimes, retirees spend their first few years of retirement ticking off their bucket list goals, such as traveling the world. But will the rest of their funds sustain them once they return home?
In case you didn’t know, retirement can be expensive. It’s estimated that you need 70-80% of your current income to sustain your standard of living. Thus, identifying your retirement spending needs is one way to have a seamless retirement. Doing so will allow you to have realistic expectations for your retirement and determine the size of the portfolio you’ll need to prepare to sustain your lifestyle.
For example, the 70-80% estimate can be unrealistic if you haven’t cleared some of your debt, such as a mortgage. Your retirement stage could also be disrupted if unforeseen medical emergencies occur, and these happen often.
To determine your retirement needs further, you need to ask yourself a few questions:
- What do you want to achieve in your retirement?
- What activities will you be engaging in during your retirement years?
- How much money will you need to live your dream retirement?
- Will you engage in other income-generating activities?
- Where do you want to live?
Your retirement dream and goals should be clear so that you can stay motivated in planning your fulfilling retirement. It will also give you a great starting point because you don’t want to find yourself short of money when you need it.
2) Save Up And Save Often
The significance of saving when planning for your retirement can never be underestimated. After all, you ought to have been saving money way before approaching your retirement. Saving has always been and will always be a rewarding habit. If you haven’t been saving yet, the time to start is now.
You can grow your savings account by starting with an annual goal and then breaking it down to monthly targets. Even when you have many financial obligations, begin with the least amount you can and see that amount grow gradually.
The goal of saving while planning for retirement is to help you invest in a long-term goal while focusing on other responsibilities, such as paying off debts or funding your kid’s college education. You can also save through two remarkable ways: your employer’s 401(k) plan or through an Individual Retirement Account (IRA). These two are suitable because they have tax advantages—your money grows tax-free, and you won’t be charged when taking out the cash.
3) Invest Your Way To A Good Future
You also need to start investing for the long-term as you prepare for your retirement. One key tip for retirement-focused investing is not to let fear and anxiety drive your decisions. These feelings are normal but can be a huge hindrance to your retirement vision. They could also influence you to make knee-jerk decisions.
Just like when investing for any other purpose, you need a lot of patience. Remember, you’re investing for the long-term. To further help your decision on where to put your money, determine your time horizon first. Some investments may not be suitable for future retirees due to the time you have left until you reach retirement age.
For example, if you’re young and have about 30 years to retirement, you can have your assets in high-risk options, such as stocks. While they may be volatile, stocks have a history of outperforming other investment options during long periods, such as 10 years.
Remember that the older you get and the closer you approach your retirement, the more you should focus on income generation and capital preservation. For example, you can consider options, such as bonds, that will not give you many returns but are less volatile. Precious metals are another less-volatile investment option. You can learn more about them at valuable information sites such as Augusta IRA and others like it.
Smart Now, Smarter Later
Retirement planning is one of the smartest things you could ever do. You don’t want to spend your retirement years regretting and toiling.
To give you a head start, identify your retirement spending needs first. Next, start saving your hard-earned money through your employer’s 401(K) plan or IRA. Finally, invest your money in options depending on how long you have to your retirement. A combination of these tips would indeed lead to a cozy retirement package for you.