Every great plan has to start somewhere.
It doesn’t matter if you’re just starting out or getting a late start with financial planning for retirement. All of it can look confusing before you have a plan, regardless of where you are in life.
But you shouldn’t let the complexity of the details intimidate you. Retirement is one of the loftiest goals that you’ll ever reach for. But people make sensible, workable plans every day, and so can you.
Here are the basics of retirement planning to give you a running start. Soon, you’ll be designing goals for your life and the life you want at retirement.
Pets can also factor into your plans, as their expenses increase with age, too.
How Much Income You’ll Need
Probably the first and most logical question that every person planning for retirement should ask is how much money is needed. The answer is different for everyone, and depends on several factors. When do you plan to retire? Do you want an extravagant life filled with travel, or are your tastes simpler? Do you plan to continue working to some extent, or will you leave the 9 to 5 permanently?
Determining how much income you’ll need forms the foundation for all retirement plans. Think about the cost of living where you live or where you’ll want to live, the lifestyle you prefer, and which activities you’d like to enjoy. A retirement calculator comes in very handy for this step, and others, including projected rates of return on your investments and how much Social Security benefits you can expect to receive.
Your current career might change, and with it your retirement contributions.
Sources for Retirement Income
It’s a given that Social Security benefits can barely sustain any lifestyle under the best of circumstances. The benefits that you receive should be considered supplemental to your other sources of income. This is where retirement planning can become a little tricky.
A 401(k) and IRA plan can provide a chunk of funds for retirement if you contribute regularly while you’re working. Stocks, mutual funds, annuities, and other investment are riskier, but also pay out bigger rewards in the long run. When you calculate your projected contributions and investments over a lifetime, Investopedia says that you shouldn’t forget to account for inflation. A penny saved is a penny earned, but it will be worth less once you retire.
Common Pitfalls to Avoid
Some of the most common planning mistakes are also the easiest to avoid, as long as you’re aware of them. For example, leaving work too soon can dramatically alter how much you’ll receive in Social Security, says Zuki Financial. If you take early benefits, you’ll receive about 8 percent less for every year that you could have waited.
Medical expenses can’t be accurately predicted, but you can plan for long-term-care insurance. And if you live a very long life, those expenses could really add up. Withdrawing too much too soon from retirement savings is another mistake, and one which can come with big tax implications.
Retirement planning covers a tremendous amount of ground, and there’s a lot to learn along the way. Chances are, the plan that you start out with will experience at least a few tweaks by the time you retire. That’s why NewRetirement exists. We have the tools and resources to help you make the best and most educated choices, no matter how your situation changes through the years.
In just a few minutes, you can gain a clearer picture of your current situation, what you’ll need to retire, how your existing plan (or lack thereof) factors in, and which changes might help you get better results. Click here and give our Retirement Calculator a try today, so you can design a better plan for tomorrow.
