When you think of retirement, the picture that first comes to mind will be of a relaxed lifestyle with plenty of time to do things that you love. However, the grass always appears greener on the other side.
The truth is that there is a lot of good financial planning that you need to do before the big day if you want to materialize these dreams. Needless to say, many people approaching retirement feel apprehensive about their ability to afford it.
There will be concerns about realistic savings, safe investments, social security, and long-term care as well. Fortunately, retirement planning is easier than you may think. Just taking a few right steps can go a long way in securing your financial future even when you won’t be able to work and earn.
Here are the things you need to do for getting started.
#1 Calculate how much money you would need
The most critical aspect of retirement planning is deciding how much money you will need once you stop earning. The assessment is subjective and depends on your day-to-day expenses at that time.
Remember that you are likely to spend less on some things and more on others once you retire. Estimating your day-to-day expenses is the best way to get started. Consider fixed expenses such as rent or mortgage, groceries, pharmacy, insurance, utilities, and taxes.
Apart from the essentials, keep in mind the discretionary expenses like spending on travel, gifts, and entertainment. Certain work-related expenses such as commute expenses will no longer be there. Realistically, medical expenses will go because you may experience age-related medical problems.
You also need to make an assessment of your health care coverage to ensure you have enough of it. Purchasing extra medical coverage makes sense when it comes to visualizing a financially secure retirement.
#2 Save as much as you can
Savings make the core of a solid retirement plan. Ideally, you should try to save 10–15% of your gross income for securing your life post-retirement. If your employer matches your retirement contribution, it is best to adjust your saving amount to sum up to an optimal percentage.
A lower amount makes sense if you are just getting started and you can gradually increase your contribution to these savings each year. An employer-sponsored savings plan such as a 401(k) is a good idea because you can also save on current income tax with them.
You may also consider opening an IRA which allows for automatic contributions with scheduled withdrawals from your bank account on your payday. This makes it a compulsory saving every month and you won’t miss even if you forget.
#3 Cut your expenses
Savings is certainly the magic word for those who want to live comfortably post-retirement but you cannot ignore the significance of cutting down your expenses. An honest evaluation of your expenses is the best way to get started when it comes to fulfilling long-term savings goals.
Create a detailed list of your regular spending and see exactly where the money is going. Collecting your receipts, bills, and bank statements is a good approach as it gives a clear picture. That way you will be able to track the avoidable and unexpected expenses, which is the first step to keeping them in check.
Smart spending even on the little things can also make a difference. You may also go the extra mile to save up on electric bills, gas bills, and phone bills. Every penny you save up can be put aside for retirement savings.
#4 Invest your money wisely
Surely, savings and smart spending go a long way in making your retirement planning a success but you cannot overlook the significance of investments as well. While you may do some research on investing, professional advice from an expert is a better approach.
You can check Bogartwealth.com to understand how experts can guide you in the right direction and ensure that life becomes easier after you retire, all because you invested your money in the right places. Make sure that your retirement savings is not a mystery and you should understand how it is invested and whether it is working to your best advantage.
Consider a diversified portfolio, with an optimal mix of stocks and bonds, mutual funds, precious metals, real estate, and exchange-traded funds.
#5 Consider your home
Having a mortgage-free home before you retire is a matter of good luck because you will be secure until the end of life. Conversely, a mortgage is an extra expense that will burden your retirement savings. Obviously, you must consider the time required to pay out your mortgage while planning your retirement.
For some, downsizing a home or moving to a place closer to family members comes up as a smart option. A smaller property is better if it is mortgage free because you may not need a big space (with children probably going on their own). Moreover, the maintenance and upkeep of a bigger home get taxing over time.
And you can actually move the money left as surplus after downsizing into your retirement savings. In any case, you should consider your home when you start thinking about life after getting retired.
#6 Know the right time for social security
Timing for social security is important because it can have a big impact on your finances. It can be taken between ages 62–70 but the amount of money you get will differ based on when you take it. For example, the amount you get at the age of 62 will be significantly lesser than what you receive waiting for full retirement age.
It would be smart to wait till later to take your social security if you keep working even after retiring or are not really strapped for cash. You will end up being more secure with this approach.
The right financial decisions today are an assurance to a happy and secure future after retirement, which is something that everyone looks forward to. Getting professional advice is worthwhile because it can bring perfection in your retirement planning initiative and make you confident about a better tomorrow.