Advertising
Advertising

How to Financially Plan for Your Retirement

How to Financially Plan for Your Retirement

retirement-plan-options1

    Even if you’re young, retirement will arrive faster than you expect. If you’re not in a career you love, you might even feel like retirement can’t arrive quickly enough. Even more concerning is the idea that if you’re not financially ready for retirement, you could spend your “golden years” struggling to stay afloat. Fortunately, there are ways you can more easily avoid that risk and financially plan for retirement. Here are five issues to consider when you’re making those retirement plans.

    1. Understand the Differences Between Savings and Income

    Having a savings account or other investment vehicle is a great idea. You want to have saved as much as possible before you retire, so you can be ready to stop working and enjoy whatever you have planned in your later years.

    Advertising

    Savings, though, is not the same as income. If you don’t still have any money coming in, your savings could eventually be depleted. Because you don’t want that worry hanging over you in older age, you need both savings and income.

    One way to generate more income for your retirement planning is by opening accounts that provide you with strong returns over time. Scottsdale Bullion and Coin suggests that you consider transforming part of your retirement investments into a tax-deferred asset through the creation of a precious metal IRA. Precious metals such as gold can increase in value at a much stronger rate than more traditional investment vehicles.

    2. Pay Off Debt

    Debt is a problem for most people, from early adulthood through middle age and beyond. However, when you go into your retirement years with debt, the struggle can become even more significant. Therefore, it’s very important to factor in a debt repayment plan before entering retirement.

    Advertising

    Cars, homes, student loans, credit cards, and other types of debt should all be paid off before your retirement date. Then, all you need to be concerned with in your later years are normal household bills, along with standard purchases and anything extra you want to spend money on (travel, family, etc.).

    3. Apply for Government Benefits

    It’s important to know what kinds of benefits you’ll be able to receive from the government in retirement. Social Security and Medicare may be very important to you, depending on what other income streams and insurance options you have. However, it’s often best to delay receiving Social Security, if possible.

    Those who put off drawing on their Social Security benefits will get more per month—all other things being equal—than those who claim it early. If you’ve successfully planned for retirement, you shouldn’t have to take your Social Security benefits too early.

    Advertising

    4. Budget for the Future

    The cost of long-term care is rising, and nearly 70 percent of people who live past the age of 65 will eventually need this type of care. Some will require it for a number of years. With that in mind, you should financially plan for retirement in a way that takes into account as many different scenarios as possible.

    Long-term care insurance can be a good choice for retirement planning. You can also consider investments that will pay strong dividends, as these can be used to pay for long-term care, as well. Assuming that you won’t need this type of care could leave you struggling in retirement, so it’s much better to plan for the possibility.

    5. Attend to Legal Matters – Insurance, Wills, Power of Attorney

    Getting your affairs in order is another excellent way to handle financial planning for retirement. Go through your will and make sure there aren’t changes you’ve put off making. Also, consider what kind of insurance policies you have, how much they’re for, and whom you have for beneficiaries.

    Advertising

    If you have a power of attorney (POA), make sure you’re comfortable with the person you’re giving control to. If you aren’t, or you don’t have a POA, now is the time to get one ready. The odds are that you’ll enjoy many happy years in retirement, but it’s better to take care of things sooner, rather than later.

    Attending to legal matters early will help ensure that your retirement will be comfortable, and that you won’t have to worry about money as you age. As you get closer to retirement, you can assess how much you’ll have in terms of savings and income. You can also take a look at your debt levels and see what you might need to change to pay off debt before you retire.

    No matter how young you are, it’s never too early to start planning for retirement. If you start budgeting and preparing now, you’ll be ready to live comfortably when you reach an age where you want to retire. Then, you can move confidently away from the workforce and into all the joy and adventure your later years will have to offer you.

    Featured photo credit: Skloff via skloff.com

    More by this author

    How to Financially Plan for Your Retirement 5 Lifehacks to Increase Activity in Your Job Make Your Family Vacation Cheap And Fun In A Way Most People Don’t Know 5 Tips to Help You Choose the Right Medical Career Path Simple Yet Effective Life Hacks to Make Your Lifestyle More Active

    Trending in Money

    1 The Average Retirement Savings and How to Save Wisely 2 How to Invest for Retirement (The Smart and Stress-Free Way) 3 How to Nix Your Credit Card Debt in Less Than 3 Years 4 Top 5 Spending Tracker Apps to Manage Your Budget Smart in 2019 5 How to Use Credit Cards While Staying Out of Debt

    Read Next

    Advertising
    Advertising
    Advertising

    Last Updated on June 6, 2019

    The Average Retirement Savings and How to Save Wisely

    The Average Retirement Savings and How to Save Wisely

    Are you on track for retirement?

    If not, don’t worry, I’m not sure either. I save each month and hope for the best.

    Fortunately, I’m at an age where most people don’t save so I’m ahead of the curve.

    But, what if you aren’t in your 20s? What if you’re near retirement and are looking to gauge where you stand?

    If so, keep reading. Here’s how to prepare for retirement and save wisely during the process.

    What Does the Average American Have Saved for Retirement?

    Saving for retirement is tricky.

    Tell someone straight out of college to save $10k a year for retirement and it’ll be next to impossible.

    Make the same request to someone decades older and they’d be more likely to be able to save this amount. But, a 20-year old college student can be “financially ahead” of someone saving more than them. Why?

    Age matters in your financial journey. The younger you are, the more time you have to save and put compound interest to work. As you get older and have more saving power, you’d have less time to put compound interest to work.

    Here are the average savings Americans hold by age bracket:

    20’s – $16,000

    During this stage, most people are paying loans and moving up the corporate ladder. Your best bet during this stage is to focus on eliminating debt and increasing your income. Don’t focus only on getting a high-paying job neither.

    Advertising

    Instead, focus on learning via Podcasts, reading books, and taking specialized courses. Doing this will make you more valuable and give you more career options.

    30’s – $45,000

    At this stage, you’ve hopefully escaped your entry-level salary and work at a career you enjoy. Your earning power has increased but you now have more obligations. For example, marriage, kids, and a mortgage.

    Set a plan to pay off all your debt and focus on eliminating unnecessary expenses. Leverage financial tools like Personal Capital to ensure you’re on track for retirement.

    40’s – $63,000

    This is the stage where you’re at the prime of your career. Top financial institutions recommend you have at least 2 to 4 times your salary saved up. If you’re falling behind, start maxing out your 401K and Roth IRA accounts.

    50’s – $115,000

    During your fifties, you’re close to retirement but still, have time to save. You may be helping your kids pay college tuition and other expenses. Since you’re at the peak of your earning power, max out all your retirement accounts.

    60’s – $172,000

    By this point, you should have about eight times your salary saved up. If not, you’ll depend primarily on social security benefits averaging $1400 per month. Max out all your retirement options as much as possible before retiring.

    Ways to Save Money on a Tight Budget

    The sad reality is that most Americans aren’t saving enough for retirement.

    Even high-earning power isn’t enough to secure one’s financial future. You need to have the discipline to save for retirement while time is in your favor. Don’t wait for you to have a high salary to save, start with having a small budget.

    First, get a clear picture of where you stand. Write down a list of “needs” and “wants.” For example, Netflix and Amazon Prime are “wants” and a “cell-phone” is a need.

    Use tools like Personal Capital to analyze your spending patterns. Personal Capital allows you to add all your financial data in one place–making it a powerful option to gauge where you stand.

    Once you know all your expenses, organize them from highest to lowest expense. When you can’t cut more expenses, call your service providers to negotiate a lower price. If you’re not good at negotiating, use services like Trimm to lower your monthly expenses.

    Advertising

    How to Save Money Each Month

    By this point, you know the average amount of money you should have saved for retirement based on your age.

    But, breaking this down into monthly goals can be challenging. Here are some rule of thumbs to follow:

    Aim to contribute 10%–15% of your salary each paycheck. Review your progress each week.

    Why so often? The reality is that life gets in our way and you will have many financial setbacks. Your goal isn’t to be perfect but to get back on track instead.

    Reviewing your finances weekly lets you know where you stand with your retirement. This doesn’t have to be a long process either. All it takes is login in Personal Capital to view your net worth and check how much you have saved for retirement.

    Turn saving into a game and aim to save more each month. It will get challenging but you’ll get creative and find more ways to save.

    Top Money Saving Challenge Tips

    To prepare for your financial future and not be another statistic you need to be different.

    How?

    By adopting new habits that’ll help you become a saving machine. Here are some ways you can save more:

    Automatically Contribute Towards Retirement

    If you’re working for a company, you can automatically contribute towards your 401k. If you’re not currently contributing more than 10%, make this your goal. Contribute 1% more today and automatically increase this amount a year from now.

    Odds are that you’re not going to be negatively affected by contributing 1% more. Many times we spend our money on things we don’t need. Contributing more towards retirement is a great way to secure your financial future.

    Advertising

    Use the Right Tools to Know Where You Stand

    Once you’re contributing more towards your retirement accounts, gauge your progress. Make use of finance tracking apps to help you view the big picture of your retirement.

    When I’d first signed up for the app Personal Capital, I didn’t know I had a negative net worth. Despite saving thousands of dollars, my debt brought my net worth to the negative. Knowing this motivated me to save more and spend less.

    Now, I have a positive net worth. But, it was because I was able to view the big picture using the app. Find out what your net worth is using a finance tracking app and you may surprise yourself.

    Bring in Experts to View Your Blind Spots

    If you have too little or too much money saved, you should consider hiring financial experts.

    Why?

    You may need someone to hold you accountable to help you reach your financial goals. Or, you may need help managing your money as effective as possible.

    Regardless of the reason, getting help may help improve your financial situation.

    Before you hire an expert, find out which areas you need help the most. For example, if you’re constantly overspending, find a debt counselor. If you’re struggling with choosing the best investment options, hire a financial advisor.

    Speed up Your Retirement Contribution

    After learning how to manage your money well, the next best thing is to earn a higher income.

    You’re capped at how much you can save but not much you can earn. Even if your employer isn’t giving you a promotion, you can still take charge of your financial future. How?

    By starting a side-business.

    Advertising

    This will be something you’d work on after you’ve finished your day job. Once you start earning income from your side-business, you’ll be financially better off.

    The best part is the more work you put into your side-business,[1] the more potential it has to earn more money.

    So start a side-business in an area you’re familiar with. For example, if you enjoy writing, do freelance writing for small e-commerce businesses.

    Once you’re earning a higher income, you can contribute more towards your retirement. Don’t wait for the right opportunity to secure your financial future, create one.

    Reach Financial Freedom with Confidence

    What if you were able to retire tomorrow with no problem, all because you’d have enough money saved up and little to no debt left to pay off? How would you feel?

    My guess is that you’d feel happy and relieved.

    Most Americans are falling behind their retirement goals for many reasons. They’re not prepared, they carry bad money-habits and are thinking short-term.

    For you to retire successfully, you need to work backward and adopt better habits. Contribute more towards your 401K and focus on growing your income.

    If you do, you’ll save money and pay debt faster.

    Don’t beat yourself up if you’re behind your retirement goals. Take the first step today towards a brighter financial future. Isn’t retirement worth the hard work and sacrifice to be at peace?

    Featured photo credit: Huy Phan via unsplash.com

    Reference

    Read Next