When we think of retirement many of us think about finally being able to kick back and explore our passions now that we no longer have to work. We might think of traveling to exotic locations, working on that home improvement project we never got around to, supporting organizations that we care about, or finally being able to spend more time with family and friends. While we all have dreamed about retirement many of us have not fully thought out what we need to do beforehand so that we can be financially secure and enjoy our retirement and not spend sleepless nights wondering how we are going to pay our bills.
The best time to start planning for retirement is right now. It does not matter how young or how old you are, start planning right now. Too many individuals, upwards of ¼ of us, have no retirement savings at all, and are completely unprepared. In addition among those who do have some retirement savings most do not have enough saved to keep their standard of living when they retire. While retirement might be easy to put off either because we find it too complicated or because we do not think we are in a financial place where we can save for retirement, if we do not plan we will regret it in the end.
Retirement Planning Tips:
Stage 1: When we are young we should begin our retirement planning by setting a retirement goal. This goal is not a random number you pull from your head. A traditional rule of thumb is called the 25x Rule where we estimate our annual expenses in retirement and multiply that figure by 25. So if you think your annual expenses will be $50,000, for example, the 25x rule suggests you’d need a total of $1.25 million saved Most of us should start saving around 15% of our income starting at age 25 if we hope to retire by age 62.
Stage 2: Next open a retirement account. While this might seem easy to do in theory in reality this can become very complex very quickly. While there are a large number of plans, two main types of retirement accounts are employer-sponsored retirement accounts, like 401(k)s, and individual retirement accounts (IRAs). Which accounts will best serve your needs will depend on a variety of factors including if you work for an employer who offers 401(k)s etc. It is important for you to take the time to do the research to determine which will be a best fit since each has its own rules and regulations which will impact your retirement in the long term.
Stage 3: Finally as you age make sure you are putting more and more money away in your various retirement accounts. If you have an employer match make sure you contribute up to the match. Consider hiring a financial planner to help you navigate your finances and make sure you are on track to have enough money when you retire to meet all your goals for yourself and your family.While we all hope we will reach an age where we will be able to retire, too few of us start planning for that retirement early enough. The process can seem confusing and we may not know what questions to ask. In the end we need to face this fear heads on. Retirement does not have to be scary or something we can’t afford ever to do. You can save for retirement so that once you have reached your golden years you will be able to spend them exploring your passions, traveling or connecting with family and friends.
Welcome to Motivational’s. This is Elliot Grant, fitness fanatic, and your go to advisor and blog post writer, putting your fitness first.