HOW TO PLAN YOUR RETIREMENT

Retirement is a long-term goal, it’s something everyone should have at heart as they go about their 9 to 5 jobs. You must understand that the sooner you start planning for your retirement, the better for you, and the amount of money you want to retire with is totally up to you. There are a lot of rules and formulas out there now that can give you an insight into how you should save and how much you should be saving for retirement.

Retiring early is a good deal but it’s also a game to play wisely and you must have an ultimate end goal at heart. This is knowing how much you need that will cover your expenses from year to year since you won’t be working.

It is heartbreaking to bring to your notice that a lot of people around the world especially in the United State are unprepared for retirement. The National Institute on Retirement Security has disclosed that 45% of US citizens have zero retirement balance, and this is not safe for anyone who is working a 9 to5 job or planning to retire.

WHAT IS PENSION

A pension is a periodic payment made to an employee to support his or her retirement.

WHAT IS A RETIREMENT PLAN?

A retirement plan(s) is a strategic, detailed, and well-understood means by which one can continue to meet all their goals and dreams irrespective of the fact that they are not working anymore. Your retirement plan comprises activating a saving habit, identifying and building legit sources of income, managing assets, and risks, and finally maintaining or sizing-up living expenses.

It is important to know that every retirement plan is unique to every individual and dependent on how much they earn every year. To an extent, I may say everyone has a picture of how they want to spend their retirement life but many don’t have the money to fund that lifestyle, and this is why it is very vital that long before retirement, one should have a comprehensive plan or seek the help of professional in this field to assist them on creating a retirement plan.

RETIREMENT GOALS

While working on your retirement, it is very important to think about what your retirement will look like, will you be content with your retirement income?

Some people say you will need about a million dollars to retire to live a comfortable life, while others use the 80% rule. The 80% rule simply means living on 80% of your income when you retire. Let’s say you are earning $120,000 yearly, this means you need a source of income or saving that will generate $96,000 yearly for at least 20 years. But if your income is nothing close to this, it is advisable to adjust your lifestyle to fit into your expense or what you can afford comfortably.

STAGES OF RETIREMENT

There are different stages when it comes to retirement, and this is broken down into three, which are:

Young age retirement (age 21 – 35)

People around this age may not have money to retire but they have time to let investments mature over time, which is very important and one of the significant aspects of retirement. This kind of investment is called compound investment.

Compound investment is the process by which you reinvest your capital and the profits you get from a business or previous investment back into the same business to yield more interest.

At this stage, it is vital to stay away from credit card debt as this has a way of drastically reducing your income even before they are been handy. Most importantly it is best to keep a good healthy credit score, as we know this opens doors to a high credit limit.

Middle age retirement (age 36 – 50)

Most of the time people around this age have a lot of financial tensions and which a lot of the time, it includes student loans, credit card debt, insurance premiums, and mortgages. Nevertheless, it is very important to continue saving at this stage.

If you plan to retire at this age, you must have taken advantage of compound interest investment in your 20s, and while working take advantage of the 401(k) or IRA your employer offer. And also at this stage, you should learn how to generate other sources of income like get a side hustle, learn a skill that aids you in getting freelancing jobs or rent your car.

It is also advisable that you increase your retirement savings at this stage and regularly do your account check.

Late age retirement (age 50 – 65)

People around this age are advised to make their investment account traditional and continue to live within their means. At this stage, you should have been able to clear every form of debt such as student loans, credit card debt, mortgages, etc. doing this will leave you with more income to invest. Teaching your children about money and the importance of retiring early will set them apart from other kids, financial intelligence is something that a lot of parents failed to pass to their children and this resulted in poor management of funds and assets when the parents are no more.

HOW MUCH DO YOU NEED?

Most people find out that they spend more money when on retirement than in their working years, while others find out they are content, living a modest and simple life. What you have to do to live within your retirement income includes: –

  • Make a complete budget and stick to it both now and in retirement.
  • Make conservative withdrawals from a retirement plan
  • Work per time in retirement
  • Consider an annuity
  • Use assets such as homes as a source of income.
  • Explore longevity insurance
  • Invest in financial products that will generate dividends

HOW TO START SAVING FOR RETIREMENT

One of the best ways to start saving for retirement is by starting today, saving as much as you can within your limit, take advantage of the compound interest we talked about earlier. You can also contribute to your 401(k) account, open an IRA, and if possible, have an automated saving account. Having done these things, and continuing to do them will set you up for financial freedom.

CONCLUSION

Retirement planning should entail assessing various risk concerns ranging from identifying income sources and adjusting spending to dealing with health care expenses and many other concerns.