Basic Steps To Take When Planning For Retirement

Savings

There are merely 36% of Americans who think that they are making good progress saving for their retirement. With banks’ interest rates for savings decreasing and social security’s uncertain future, it’s never too early to start planning for retirement. Investing in gold, real estate, stocks, cryptocurrency or IRAs are just some of the ways to help you be better prepared for the future.

Figure Out Your Retirement Needs

A general rule of thumb is saving enough to replace 70% of your annual pre-retirement income. You can do this through savings, investments, other sources of income, and social security. You will also need to consider how you’ll be spending your retirement years. If you plan on paying off a mortgage before you retire, you can save less than 70% and save more if you see yourself traveling often. Some online calculators can help you find out how much you need to set aside to reach your goal.

Invest Your Savings

It is wise to save a portion of your monthly income towards retirement. Investing your savings or at least a part of it will help compound the income you will be receiving. Diversify your investments to lessen risks and to strengthen returns. You’ll need to do research and arm yourself with financial knowledge to be able to choose what to invest in. Consider putting money in an individual retirement account (IRA). An IRA is a type of long-term savings account with tax advantages. You can open an IRA through a bank, an investment company that offers IRA trust services, a brokerage, or an individual broker.

Reduce Debts

Make it a goal to pay off your mortgage before you reach retirement age and reduce new credit card debt especially if you are approaching 50. The fewer debts you have to pay during your retirement years mean more for you to spend on the future you envision. There will also be unexpected expenses that may come up. Healthcare may be a bigger concern as one gets older and it’s best to have the means to pay for medical issues when needed.

When To Start Planning

You can start planning as soon as you are financially independent or as soon as you start working. The earlier you start saving, the more money you will have saved towards retirement. If your employer is offering a retirement savings plan, consider contributing to it. Once you’ve planned on budgeting a part of your income as a retirement fund, stick to it. It will greatly help you to be disciplined and lead a lifestyle that is within your means. Avoid getting into debt unless necessary. If you’re 50 or older, it is never too late to start either. Review your finances and cut down on unnecessary expenses. Aim to set aside a set amount each month and don’t touch those savings. If you are able to, make the maximum contributions you can to your employer’s retirement plan or a Roth IRA. You won’t be dreading retirement if you make the right plans beforehand.

The views expressed in this article are those of the authors and do not necessarily reflect the views or policies of The World Financial Review.