Retired life means something different for each of us; for some it could mean transitioning into part-time work that offers purpose or learning new skills, while others may opt to leave work altogether and spend more time with their loved ones.
No matter how you envision retirement, it’s wise to start planning early so that your financial future remains secure. Here are a few helpful suggestions:
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Determine Your Goals
As soon as you make a decision to retire, it is essential that you identify your goals. Doing this will enable you to form a savings plan and determine how much should be saved; many financial experts suggest setting aside at least 15% of annual income toward retirement savings – however this may prove challenging for some individuals so consider starting with less of your income and gradually increasing it over time to reach your target goal.
Step two in setting retirement goals is conducting an inventory of your daily expenses and monthly expenditures, such as food, housing costs, entertainment and day-to-day items such as clothing and grooming products. Doing this will give you a clear picture of where your finances currently stand as well as how much you are spending each month on each of these categories. You can visit this helpful site for tools to help you track your spending.
Once you know how much you’re spending each month, subtract it from your income to determine the monthly amount necessary for retirement savings. In order to be accurate when estimating this figure, make sure that existing accounts like 401(k), IRA or high yield savings accounts are considered when calculating needs accurately.
Although it can be difficult to factor in your investment portfolio, this can provide an essential component of your retirement funds. If you are close to retirement, you may want to choose low-risk investments.
If retirement is further away for you, you may want to consider adding more high-risk investments to your portfolio. These can include stocks as well as more nontraditional assets like precious metals. These can help you mitigate your risk as an investor. You can click the link for gold IRA help from professionals. Be sure to research any investment opportunities thoroughly.
Another key consideration when planning for retirement is how long and what lifestyle you envision during that time. For instance, traveling extensively or moving closer to family will incur additional costs that must be considered in your calculations.
As part of your retirement planning strategy, it is also wise to factor in inflation rates. Over the past century, prices have increased by approximately two percent annually and this can dramatically alter how much money will be needed in retirement.
Finally, use a retirement calculator to explore how varying variables impact your estimated savings needs. Try changing the rate of return/interest on investments to see how higher or lower interest will impact the final balance; or alter your retirement age and see how delaying or early retiring affects how much savings will need to be saved in order to reach that age.
Create a Budget
Budgeting is key when approaching retirement, and creating one allows you to see exactly where your money is being spent and make sure your savings last as long as possible.
An Excel spreadsheet can help you track expenses both current and projected. Begin by reviewing transactions from bank accounts and credit cards from the past 12 months; this will enable you to identify recurring bills such as utilities, loans and credit card payments as well as determine average monthly spending compared to retirement income streams. Click the link: https://consumer.gov/managing-your-money/making-budget for more budgeting tips.
Once retired, you will need to determine when and how much to withdraw from your retirement “buckets.” Working with a financial professional during this process is highly advised for optimal results.
As soon as you retire, expenses tend to remain the same or decline; this includes housing costs, food, clothing and health care expenses. But as time goes on and your health changes, health care costs could become more costly; additionally, travel and hobby costs may increase.
As you near retirement, expenses often increase significantly, especially if you move to an assisted living facility or hire home health aides. Furthermore, it’s wise to prepare financially for unexpected medical or other emergencies that might arise.
Eliminate Debt
If you’re carrying debt into retirement, the road may become anything but relaxing. Depending on the nature of your debt and current income level, various strategies exist that can help you tackle it before setting sail on retirement.
Before retiring, take stock of what your priorities are in retirement. Living costs, day-to-day expenses, health care needs and helping the kids should take priority over any debt that remains.
If this is still a priority for you and you still owe credit card debt, try creating a repayment plan while you still work; consider balance transfer credit cards with reduced rates as they could speed up repayment time while cutting interest costs over time.
If you have ample retirement savings, using those funds to repay debt may be worthwhile; just remember that withdrawing from these accounts often incurs income tax penalties that could significantly diminish how much is left over for retirement goals.
As noted above, withdrawing money from investment accounts to pay off debt could incur tax implications; before making such a decision it is advised that you consult a financial adviser.
One way to ease debt in retirement is to find ways to cut non-essential spending. Switching utility or insurance providers might yield small savings; similarly, canceling magazine and cable TV subscriptions might save some money as well.
Credit counselors provide advice and services that can assist with budgeting and money management techniques to help achieve your financial goals. They may even assist with bankruptcy filing if that’s best suited for your particular circumstances.
At the core of it all lays a plan to eradicate your debt in retirement, so that when the time comes you can enjoy your golden years without consumer debt payments hanging over your head.
Start Early
Set realistic expectations when it comes to your retirement savings. Though recent years may have provided attractive returns, that doesn’t guarantee they’ll continue for the next 30-40 years. Aim for lower than projected rates of return so as to allow yourself a cushion against potential shortfalls in income or expenses.
One important consideration in retirement planning is housing costs. Since many retirees spend most of their time at home during retirement, it is wise to calculate an estimated cost of living for this time period; this could include mortgage or rent payments, property taxes, insurance costs and any maintenance expenses expected in this timeframe.
Planning for retirement should also include consideration of anticipated healthcare costs. Medicare may help lower out-of-pocket medical bills, but it’s still wise to save enough to be ready for unexpected costs if they arise.
Early retirement offers more than financial benefits; it also improves overall health by decreasing stress levels. Freeing oneself of daily commutes and work environments that cause undue strain can have profoundly positive impacts on mental and physical wellbeing, leaving more time for hobbies, activities, interests or pursuits such as volunteerism, recreational pursuits or travel that bring immense personal fulfillment and pleasure to their lives.
If you are considering early retirement, be sure to seek advice from an advisor. They can assist in devising effective strategies for funding an early retirement and can give the guidance needed for making it possible.