Making your retirement comfortable is one of the greatest dreams you will love to attain despite the challenge associated with it. Certain retirement planning steps are expected you take to make this desire a reality.
Research has revealed that several working-class people are usually ignorant of the strategies that can be applied to attain this financial victory. This is not because they wished themselves an ill retirement future, but it’s simply because they are not conscious of retirement until it’s probably too late to address.
Some of the retirement planning steps that have been proved to be effective over the years include:
Evaluate Your Present Situation
Being honest with yourself about your present situation is the first out of the retirement planning steps because it helps you to make an accurate decision.
Start by taking records of how much your retirement account has accumulated. Your retirement balances include your workplace retirement plans and individual retirement accounts balances. Remember that savings made towards the acquisition of assets of emergencies should not be included.
Target A Retirement Age
This is another important step out of the important retirement planning steps.
Setting a retirement age for yourself will help you to know how much effort is required for you to achieve your desired retirement savings.
Kirk Chisholm, a wealth manager and principal in Lexington at Innovative Wealth Management says “the best way to fix a retirement age is by putting into consideration the best time you would have saved enough money to live on”.
Identify Your Source Of Income
There may be other sources of income in retirement, but existing retirement savings is a great determinant of your monthly income during your retirement.
You should put other sources into consideration such as the Social Security benefit that most workers qualify for. The benefits accruing from Social Security are dependent largely on certain factors such as the history of work tenure, career earnings, and the age at which the benefits can be taken.
Sometimes Social Security may be the only source of income for workers who don’t have current retirement savings. With the retirement benefit estimator provided on the government’s Social Security website, you can have an idea of how much you should expect monthly.
You may also take up a part-time job during your retirement.
Identify The Amount Of Savings That You Need
The amount that you will require will depend solely on how much you intend to withdraw yearly after your retirement. Saving for your retirement is non-negotiable.
Experts concluded that between 3 percent to 4 percent should be withdrawn from your retirement portfolio yearly. These “3 percent” and ‘4 percent’ are referred to as the retirement rules
Therefore, if you are envisaging an annual withdrawal of $40,000, over 25 years, you will require $1 million and that’s assuming the non-availability of other sources such as rental properties, pension, or any other form of a retirement benefit or income.
Purchase Adequate Insurance
In life, people make an adequate and early investment that turns out successful, but sometimes there are unpleasant circumstances that may arise and snatch away several years of hard work. These situations are most times due to a natural disaster that no one would have had control over.
Some people have been declared bankrupt all because of calamities that befell them at certain points in life and unfortunately, they could not recover from it.
This brings up the importance of having an adequate insurance policy in place to cover up for any loss incurred should situations like this occur.
There are several insurance policies that you can put into consideration but there are questions that you should answer before eventually settling down for any of these policies. This includes;
What is your present age?
Do you have dependents?
How long will your dependents need to depend on you financially?
Experts advised that signing up for whole life insurance is not a good idea especially when you are well over 45 years before making a retirement decision.
Seek the advice of a financial planner so you can be properly guided.
Avoid More Investment Risk
Taking investment risk is good but there is a certain age that it may become unsafe. If you are starting with your retirement planning steps at the age of 40 and you are planning to increase your investment because you are trying to make up for time wasted perhaps you are making your retirement plans late.
The returns you will get from the investment may be higher because of the likely chances. Instead of 7% on your investment, you can get up to 12 % but the potential loss is also much higher.
Younger persons in their twenties are safe to take greater risks since they have enough to recover from whatever losses that may arise.
Open A Roth IRA
This is one of the retirement planning steps that you can maximize. With Roth IRA, you can make regular contributions annually and even add some extras to it so has to make up for the wasted years.
The contributions made to a Roth IRA qualify for tax-free growth and qualifies for withdrawals free of tax.
Pay-off Existing Debt
In case you have an existing debt as a result of property acquired or any other reason for the loan, it will be good you increase your regular payments to settle it off quickly. Paying off your debts helps you plan better for towards retirement.
Set Your Priorities Right
In making retirement plans, you must set your priorities right in the area of how you intend to spend your savings.
Do not make the mistake of spending your savings on your kid’s college because your children are open to more alternatives as compared to you.
Your children can take out student loans but your 401(k) won’t give you that opportunity. More so, your children can start making early savings for their retirement as early as the 20s and 30s. But as for you who have passed these ages, it will be difficult to turn back the hands of time.
So your retirement savings should focus on taking care of yourself and your spouse.
Taking the right retirement planning steps will save you from running out of money in retirement. So start now by employing the several steps that have been listed above.