Retirement is exciting. When thinking about your retirement planning, you’ll want to get as specific as possible. This means having a retirement plan that takes into account all the goals you have in life. For some people, this means the ability to stay in their own home next to familiar friends and family no matter their age.
Others want to spend a lot of time traveling the world with a spouse. Many more people love the idea of living in a dream place they have visited in the past such as by the shore or quiet cabin in the woods. Your planning should be about making this happen.
What is the Most Important Factor in Retirement Planning
While many factors will have an impact on your retirement planning, for most people, the single most is that of finances. Your finances have to be in order to make it work. This means knowing how much you need to save. This is also why early retirement planning is vital.
You will need enough money to pay for the things you want. Saving early has its benefits. Your savings will grow over the course of decades.
However, if you aren’t able to accomplish this goal, you can still meet your retirement planning goals. You will need to put away more money in later life. For many people, this is easier as they age and progress in their career.
An older professional is likely to earn more. Older professionals are also more likely to have paid off any student debt. That frees up more funds for your retirement. If you have been paying off loans, continue to use this money and dedicate it to your retirement planning accounts.
What Should You Consider When Setting Retirement Goals
When setting retirement goals you should consider a variety of factors. If you’re married, your spouse will have their own retirement planning needs. An older spouse may want to retire many years before you do. A younger spouse may have more years in the workforce.
The same is true of your children’s needs. Even as they reach adulthood, children need help. An older child may struggle with physical and mental health issues.
You’ll also want to think about what you are going to do in retirement. Some people want retirement planning that allows them to retire and do nothing more strenuous than a dip in the pool. Others may want to hold on to a part-time job. Consider how you are going to transition from your current job to a different work plan.
Strategies to Help you Meet Your Retirement Goals
There are many types of strategies you can use to reach your retirement goals. An employer sponsored saving account has lots of advantages. Find out if your employer provides a match for your savings. That’s free money. If you’re self employed or run a business, look for government sponsored savings vehicles such as a SEP IRA that will help you set aside money for retirement.
Other assets can also help you meet any retirement goals. Home equity is a great source of savings for many people. Moving to a smaller house frees up funds you can use as you retire. Pulling down your expenses also helps.
Budgeting well is imperative. Look for areas where you save money like eating out less. Think about taking on a second job. A side hustle like dog walking will add to your financial cushion.
Investing in the market carefully will also pay off over time. Historically, the American stock market has beaten inflation by a large margin. Blue chip stocks and treasury bills make a good source of income to add to your savings. Capital gains have another advantage. You’ll enjoy a lower tax rate than you’re probably paying on your paycheck.
Retirement Planning Is Important
Retirement planning is important to secure the type of lifestyle you desire when you retire.Most people think of their retired years as a time to relax and enjoy life. However, too many seniors leave the workforce behind only to find that they don’t have the funds for the lifestyle they want. A worry-free retirement requires careful planning.
The first step is to sit down and estimate how much money you will need. Open a spreadsheet or take out a pencil and paper and follow these simple steps to get started.
Calculate Your Current Expenses
Adding up what you currently spend each month is a good place to begin when planning for your financial future. Include all of your basic living expenses, such as housing, food, utilities, transportation and vehicle expenses. After determining your current expenses, it’s time to think about how those numbers will change when you’re retired.
Subtract Expenses You Will No Longer Have
If you expect to have major debts like your home mortgage and student loans paid off before retiring, subtract those amounts from your living expenses. You can also remove health insurance premiums if you will be eligible for medicare by the time you retire.
Consider what other expenses you can get rid of after retirement. For example, you may only need one car instead of two when you’re no longer commuting to work.
Determine Extra Expenses When Retirement Planning
Now that you have figured out what expenses you can drop after retiring, think about what new expenses you might incur. Most retirees plan to travel and participate in hobbies more often, so factor those costs into your plan. You will also want to allocate some funds for extra healthcare expenses like medicare supplement plans and more frequent doctor visits as you get older.
Factor in Social Security and Pensions
You should now have a rough idea of what your monthly expenses will be when retirement planning. The next step is to think about what sources of income you will have after you retire. Most Americans will get a social security check, and your job may offer a pension plan. Don’t forget to add profits from your 401k plan and other investments.
Account for Inflation When Retirement Planning
Don’t forget to include the effects of inflation in your plan. The money you store away today will be worth less in ten, twenty or thirty years. It’s smart to save at least part of your money in accounts that grow at the rate of inflation or faster. If the stock market is too risky for you, consider purchasing bonds or opening a high yield savings account.
Budget for Your Final Expenses
No one wants to think about their own death, but it’s important to factor in final expenses. You don’t want to leave your spouse or children with a large debt for your funeral and burial. Consider saving money by purchasing burial plots and planning your funeral in advance. You may also want to set aside funds for your children or other family members to inherit.
Decide When You Plan to Retire
The final step in mapping out your financial plan is to calculate how many years you will need to support yourself after retiring. This can be difficult because no one really knows what his or her life span will be. Err on the side of caution by assuming your retired years will last from your final day of work until your 100th birthday.
Consider Using a Calculator
The steps above can give you a rough estimate of how much money you will need to set aside for your golden years. However, a retirement calculator can give you a more accurate and in-depth assessment. You can find basic calculators for free online or purchase software with more features.
If you’re not computer savvy, you may want to invest in a professional financial advisor to help you plan your future.
Financial Advisor Benefits
Many people struggle with finding the right amount of money they will need once they retire. There are many things that you need to consider once you retire and hiring a financial advisor can help you take care of all matters. Hiring a financial advisor has many benefits besides when you start retirement planning.
Investing With a Financial Advisor
A major benefit of using a financial advisor is that not only will they help you manage your money, they will also help grow your assets. By using a financial advisor, they will present investment opportunities to you that can earn you extra money in your golden years.
Having a financial advisor can also make your life easy because managing money can be a hard task. As a senior, you want to have to worry about as little as possible, and hiring a financial advisor can take some weight off your shoulders.
The 80% Rule
When you retire, there is a rule known as the 80% rule, this rule means that you if you want to have a comfortable retirement, that you need to have your retirement salary be 80% of your salary before retirement. In order to achieve this though, you must plan accordingly and talk to your financial advisor in great depth.