Retirement planning is for every age. If you want to live comfortably when you retire, you should start planning for your retirement as early as now. No matter your age or the retirement stage you’re in, these tips can help you prepare so you are more assured that you can live the way you want after your retirement.
Below 50 years old
Have a retirement goal
It’s impossible to plan for your retirement without knowing what you want to do after you retire. So start thinking about the kind of life you want to have after you’ve concluded your career. Do you want to put up a business?
Or are you looking forward to traveling, volunteering, or becoming a hands-on grandparent? It’s never too early to start thinking of your retirement or envisioning what you want to do after you’re done working. Even if it’s likely for your goals to shift in the coming years, visualizing them today can help you begin planning for your retirement.
Determine how you can make your retirement plan happen
Once you have a retirement goal, your next step should be to find out how much money you need to achieve it. Some financial websites offer a retirement calculator that allows you to calculate how much you will have when you retire and how long your retirement money will last by considering your current age, income, savings, and age of retirement.
By having this information, you can adjust how much you’re saving now so you can have enough money when you retire.
Take every opportunity to save money
With people living longer and retirement costs rising, you’ll likely need more money in retirement than you think now. So, while you’re still earning, make sure to save as much as you can. If you can, try to save 15% of what you earn. It’s also a good idea to take advantage of retirement plans offered at your workplace, and increase your retirement contribution every time you get a pay raise.
Consider getting an IRA
In the U.S, you can open a Roth IRA or an individual retirement account that allows qualified Americans to save up for tax-free retirement money. The Roth IRA can protect your retirement savings from future tax increases that may be enacted by the time you withdraw your money.
You can also opt for a traditional IRA, which allows you to have more freedom over your investments. An IRA can provide you access to investment options like real estate, municipal bonds, and emerging market funds.
Allocate your assets wisely
Market fluctuations can give your portfolio a run down, but knowing the best ways to allocate your investments between various assets can help with the consistent growth of your investments.
Spread your investments across various assets and sectors so you don’t need to worry as much during big market fluctuations. You may also consider investing fixed amounts regularly regardless of market conditions. Rebalance your portfolio to increase your exposure to rising investments. Discuss this with your advisor so they can help you strategize.
Avoid emotional investing
Investors tend to follow market cycles, so when the markets perform well, they become excited and pour money into stocks. But when the markets go down, they become discouraged and pull out of the stock market which can cause them to miss out on potential gains as it bounces back. So when investing, avoid following your emotions as it can make you do something that can cause you to miss out on gains.
Reduce your worries through insurance
Unexpected situations can happen. You may get diagnosed with an illness that can prevent you from working and earning, or a natural calamity can damage your properties. So even if you have savings and investments, you still need protection against unexpected risks.
Ask your advisor to help evaluate your situation and what kind of protection you need, such as disability income insurance, health care coverage, or life policies. With the right level of protection, you don’t need to worry so much about the “what ifs” of life after your retirement.
Age 50 – 64
Detail your retirement dreams and goals
Now is the right time to start planning for your retirement dreams. Whether you have decided on spending your retirement on traveling, starting a business, or becoming a full-time grandparent, be specific with what you want to do during your retirement days when you discuss it with your advisor. As you are now closer to retirement, you should start taking more calculated steps toward ensuring that your retirement dreams and goals become a reality.
Catch up on your retirement savings
As you near retirement, your priority should be to save as much as you can. As much as possible, max out your contributions to your retirement accounts, including your 401(k) and IRA.
Consider consolidating retirement accounts
If you’re between 50-64 years old, you might have several retirement accounts already set up. However, you may be having a hard time managing so many accounts or investing it right. It might be a good idea to merge some of these accounts before you retire so it will be easier for you to tap your savings when you need it. Consult your advisor on the best plan of action for your retirement accounts, and devise an efficient plan for tapping them during your retirement.
Mind your health
Health care costs a lot nowadays. According to a 2020 study by the Employee Benefit Research Institute, a 65-year-old man needed $130,000 in savings, while a 65-year-old woman needed $146,000, so they can have enough money to cover health care expenses when they retire. That amount will still rise in the future, while Medicare may cover even less.
Ask your advisor about opening a health savings account and other options that can help you cover health-related expenses in retirement. Some health plans offered by employers are usually not taxable, and you will also not be taxed for withdrawals as long you’re tapping the health plan for eligible medical expenses.
Start planning for retirement income
Discuss with your advisor how much money you’ll need during your retirement years, and get advice about when to start planning for it. Ask your advisor about getting an annuity, where an insurance company pays you either monthly or in a lump sum.
Consider long-term care
According to the Department of Health and Human Services, about 70% of people in the US age 65 and older will eventually need long-term care. So if you’re in the late 50s or early 60s, consider getting health insurance that could cover the cost of a long stay in in-home care or a nursing facility. Typically, it’s best to look into premiums when you’re younger.
Re-evaluate your investments
You may need to modify your investment strategies when you’re in your 50’s or 60’s. You will need to focus more on preserving your wealth now than when you were in your 40s. Talk to your financial advisor about how you can build a game plan that can help you be more confident about achieving your retirement dreams.
Age 65 and older
Review your retirement goals
Once you turn 65, you should review your retirement goals, and evaluate vis-a-vis your current financial and health situation. Make necessary adjustments that will help align your finances to your retirement needs.
Create a spending plan
The general rule for tapping your retirement savings is to withdraw only up to 4% each year. However, there can be unanticipated expenses throughout the year, so it’s best to have a realistic spending plan that can tailor to your needs.
Be tax savvy
Making sure that you have enough money to sustain yourself through your retirement years involves knowing how to withdraw from your various accounts and which to tap first. In general, it’s best to withdraw from taxable retirement accounts before tax-exempt savings, since tax rates usually increase.
Ensure that your retirement savings last
A lot of retirees make the mistake of cashing out a big part of their assets or shifting it to fixed-income investments. While it’s good to be more cautious with your investments when you draw nearer to your retirement because you have a shorter time to recover from economic downturns compared to when you were younger, you also don’t want your investment portfolio to be eaten up by inflation because it’s too risk-averse. Keep in mind that your retirement can last more decades, so you still need to ensure that your retirement savings last as long you need them.
Raise your retirement income
Consider ways to boost your income sources during retirement, whether it’s setting up an annuity or buying more dividend-paying stocks.
Prepare for your later years
Your retirement plan is very crucial. Often, people only plan for their early retirement years, like traveling the world or volunteering. However, those plans may not be realistic when you’re in your later years.
When planning for your retirement, think about how you want to spend your later years and work through some possible scenarios. Then take steps to realize these plans, like getting long-term care coverage that can pay for services you may need when you’re very old.
Keep reviewing your goals and finances
Several things can cause your priorities to change over time, so it’s a good idea to review your goals regularly so you can be more confident living the way you want after retirement.
Kiplinger’s Retirement Report
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