More than 30 percent of Americans don’t have a retirement plan.
If you’re among these people, you’re making a big financial mistake. Perhaps you’re thinking that you’re too young to start preparing for retirement or maybe you don’t even believe in retirement.
Whatever is keeping you from creating a retirement plan, there’s one truth you can’t wish away: retirement is coming – and you don’t want it to catch you unprepared.
It’s never too late or too early or too late to start making plans for retirement. Read on for retirement planning tips that will get you started on the right footing.
Establish Your Retirement Spending Needs
Retirement means you won’t be working to earn a living. The money you’ll be spending will come from your savings and/or investments.
How much money will you need to spend in your retirement? There are a number of factors that go into the calculation of your retirement needs.
Ideally, you want to at least maintain the quality of life you have right now during retirement. Some experts suggest you need about 80 percent of your present annual income for every year you’ll be in retirement. However, with old age health wanes, which means there could be higher healthcare expenses.
The retirement location is also a big factor. Some locations have a higher cost of living than others. So, if you’re planning to retire to a state with a high cost of living, your retirement budget will be higher.
It’s not uncommon to find retirees moving from California to Texas where the cost of living is much lower. There are several other states where you’ll enjoy a low cost of living.
Then there’s life expectancy. How long after retirement do you expect to live? In general, life expectancy has been on the rise, and with good access to healthcare, most people can live well into their 80s.
Time Horizon
The average retirement age is 62. How old are you now? Get the difference. That’s your retirement time horizon.
Factoring your time horizon is key to building an effective retirement strategy. Ideally, you want to start planning for retirement as soon as you start earning an income. Starting early gives you adequate time to save more money and make investments.
That said, don’t lose hope if you’re middle-aged and feeling like planning for retirement properly isn’t realistic. You just need a more aggressive retirement planning strategy.
Saving and Investing for Retirement
Saving is the easiest way to start planning for retirement. Simply open an individual retirement account and start putting money into it every month. You can increase the savings amount as your income increase.
If you’re formally employed, your employer might offer a 401(k) plan, but don’t let that stop you from adding to your savings.
Investing for retirement is another way to plan for retirement, but it’s not as easy as saving. Investing requires expertise, but with the help of a professional, you can make good investments that will provide passive income long into your retirement.
Retirement Planning Tips You Can’t Ignore
How do you want to spend your golden years? We don’t know about you, but nobody wants to spend them working. You want to rest, travel, and age peacefully. But that will only be possible if you had planned for your retirement.
With these retirement planning tips, you now know the moves you should be making. Good luck and keep tabs on our blog for financial advice.