Retirement may feel far away, but that doesn’t mean you should postpone planning for it. Like any journey, your road to retirement becomes far less daunting when you plan well in advance. Let’s explore how you can start steering the ship today to enjoy smooth sailing tomorrow.
Start Today, No Matter Your Age
Whether you’re in your 20s or your 50s, it’s never too early — or too late — to start planning for retirement. As with any long-term goal, the earlier you start, the more time your money has to grow. Delaying could result in a shortfall when you finally hang up your working boots.
Calculate How Much You’ll Need
Start by determining what you expect to spend each year in your retirement. If you hope to maintain your current lifestyle, aim to replace 70% to 90% of your pre-retirement income annually. This estimate should consider healthcare costs, housing, entertainment, travel and other lifestyle choices.
Make the Most of Employer-Sponsored Retirement Plans
If your employer offers a retirement savings plan, such as a 401(k) or 403(b), leverage it to the maximum extent. Consider contributing enough to take advantage of your employer’s match— it’s essentially free money. Over time, regular contributions coupled with compound interest can result in significant savings.
Diversify Your Retirement Savings
Diversification isn’t exclusively for your portfolio; it’s also a prudent strategy for your retirement savings. Apart from employer-sponsored plans, consider Independent Retirement Accounts (IRAs), annuities, and even taxable investment accounts to diversify your sources of income in your retirement years.
Don’t Forget About Social Security
While you shouldn’t rely solely on social security for your retirement income, it is an important element of your retirement readiness. Check your Social Security statement to get an estimate of your retirement benefit, and factor in when you plan to start accessing these benefits into your retirement planning.
Regularly Review and Update Your Plan
Your retirement plan should not be ‘set and forget.’ Life changes, such as marriage, children, home purchases, or career shifts, can impact your retirement needs and contributions. Review your plan annually and make necessary adjustments to stay on track.
Plan for Healthcare
Healthcare is one of the biggest expenses in retirement, yet it’s often overlooked in retirement planning. Consider options like a health savings account (HSA), which offers triple tax advantages: tax deductions when you contribute, tax-free earnings, and tax-free withdrawals for qualified medical expenses.
Consider Working with a Financial Advisor
Planning for retirement is a complex task. Having a trusted financial advisor can provide guidance and support tailored to your specific circumstances, helping you to plan effectively for your golden years.
Retirement planning is a significant part of your overall financial wellbeing. By starting early, estimating your needs accurately, and utilizing a mix of investment vehicles, you can ensure you’re well-prepared for a comfortable and secure retirement. The road to retirement might seem long, but with the right planning, you can start looking forward to the journey, as much as the destination.