Retirement is a phase in life that everyone must go through, however many get in unprepared and become dependent on their working kids. At this period, the pension may be too little to keep you going which is why this is the best time to start planning for your retirement, whether you are 21 or 50 years old.
It is great to note that planning for your retirement is a lifelong process. There is no right time to start but it is best to consider your finances greatly.
Many people retire with debts, mortgages, hospital bills when they actually thought they would relax and let their hard-earned savings take care of them. Planning for retirement and setting goals determines if you’re going to be ready to settle when retirement arrives.
Here are a handful of things you need to consider about your retirement plans.
- When do you want to completely quit the workforce?
You would want to really consider when you want to retire so you can set the appropriate goals towards that date and so you can save up enough money. Some people go into early retirement and others don’t. You have to decide what it is going to be for you.
- How do you want to spend time in retirement?
Yes, how you want to spend your retirement matters. Do you want to spend your retirement years traveling to see the world? Do you want to run a little business? Do you want to spend time with your grandkids?
Every detail should be put into consideration and thought about long before your retirement so you don’t spend the rest of your years lonely and bored.
- Where do you want to live?
It is not very helpful when you have not thought about this. You should really consider this question. You probably have a mortgage right now, which you consider an asset already.
Would you still want to live in that house? If it’s the home you raised your kids, do you think it’s too big for you and would you want to get a smaller house that you can maintain later in life?
Also, you would want to consider if you’ll move into a nursing home years down the line and include it in your retirement budget.
- What Assets do you wish to acquire to sustain you?
You may want to get into real estate, do some investments and build enough assets to add to the distributions you would be spending during your retirement years.
How Should You Plan For Your Retirement?
- Get a Financial Plan And Start Saving:
Looking at the above listed, you should be able to evaluate how much you need and if you can not, it is best to get a financial advisor who can sort this out with you. The amount you are going to save should be enough to last you 20 – 25 years into retirement.
If you are a young adult (21 – 35 years old), do not think you are too young to start planning for retirement, because the earlier you start, the better.
If you earn about $150,000 per year, during your retirement year, you should have almost the equivalent or atleast $125, 000 annually through your retirement years. Start Saving and save well.
- Open an Individual Retirement Account (IRA):
Individual Retirement Accounts are set up to make preparations for retirement a lot easier. They are better than savings accounts. A reason being that, there are investment opportunities acquainted with IRAs and it is tax-deferred.
There are several IRAs available with benefits so you should know the one that bests suits you. If you want to go for the Traditional IRA in which your funds are taxed upon contributions or Roth IRA which is mostly for young adults (21 – 35) and is funded by post tax dollars. It is best to get this early in life because it helps to avoid the stress of income tax later in life.
- Take Advantage Of Employer-Employee Retirement Plans:
There are a lot of advantages that come with this. Bonuses and certain percentages that would be made to your IRA.
401(k) and SEP IRA are examples of employer-employee retirement plans. In the former, your employer contributes yearly into your account and you can do the same. It is however not advisable to withdraw from this account else there is a penalty.
The SEP IRA is a much simplified tax-deferred retirement account for individuals who are self-employed, freelancers and for those who run small businesses. Funds are put in the account without it being taxed upon and over time, the amount in the account grows with compound interest.
Though the contributor is the employer, it is owned fully by the employee.
The benefit of SEP IRA is that it offers a larger contribution whereas Traditional IRA and 401(k) allows for a $6000 contribution per year, SEP IRA allows for as much as $19,500.
The disadvantage however is that distributions would be taxed and withdrawals can not be made until the owner is 59.5 years old.
- Get A Life Insurance Policy:
A Life insurance would come to the rescue down the lane when medical bills arrive. The older you get, the more your health wanes and you don’t want to make withdrawals that would eat into your retirement plans and goals. Or in the instance of anything happening to you, your life insurance should be able to cover for that.
Furthermore, as opposed to many thoughts, many get to their retirement still with a mortgage to deal with, medical bills, debts. Your life insurance policy should be able to cover for you.
You are never too young to put these plans in order, get your finance right.
- Go into Investments:
Apart from relying on your IRAs to sustain you through your retirement, you should try making investments.
Agewise, it matters how much risk you would be willing to pay especially if you’re above 50 and nearing retirements.
If you want to invest in the stock market and you’re in the later midlife (50 – 65), it is best you invest in bonds and not stocks. Bonds though may have little returns are less risky and hardly would you lose your funds.
However, if you’re a young adult still exploring life, and having years before your retirement, you should invest in stock. Though it takes time to get returns and it is riskier, it is worth the wait.
The most important thing to do right now is, start saving as much as you can. Your retirement is the time to lay back and enjoy the goodies of your hard work. If you do not have a good retirement plan, then you plan to struggle through retirement.
I’m a 20-something stay-at-home mother and wife. I have an amazing husband, a beautiful daughter, two loving dogs, and a lazy cat. I wouldn’t change my life for anything! I love to read, listen to music, cook and blog!
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