Over the years, retirement planning has changed in many aspects. But one thing’s for sure, when it comes to being financially prepared, it is all on you. Do you want to have a better and easier retirement? You need to be completely prepared – financially.
If you’re still not thinking about your retirement, you should definitely start now if you want to guarantee a smooth transition and settle your financial commitments. To further understand how you can do that, we’ve compiled a list of key retirement-planning tips that you should take note of.
Identify future spending needs
The first thing you should do is to determine your retirement spending needs. When doing this, make sure to have realistic expectations about your spending habits. Most individuals think that during their retirement, their spending will go down about 30% of their previous spending. But that’s not always the case. Anticipate loans or debts that won’t be paid off, as well as medical expenses.
While retirements won’t include that day job you had, that doesn’t mean you should plan for nothing more than traveling or shopping. Have an accurate estimate of all your possible expenses, both needs and wants, so you can have a clear idea of how much you need to invest and withdraw every year. Never, ever overstate or understate your expenses as doing so could risk not living the kind of lifestyle you want for your retirement.
Start your retirement savings
Next, make sure you have a savings account specifically for your retirement. Having a larger savings account is always ideal while you have a steady income. Start saving and investing as early as you can, and make it a habit.
Ensure to find the right account option to save for your retirement as well. There are various options available that choosing one will depend on where or how you work. For instance, if you’re currently working at a for-profit company, the ideal retirement savings plan that you can easily acquire is probably 401(k).
Other account options to check include 403(b) and 457 plans for people working at nonprofit employers, and Individual Retirement Account (IRA), and Simplified Employee Pension (SEP) if employers don’t provide plans or if you’re self-employed. Generally, plans provided by employers have limited investments.
Nevertheless, it is recommended to keep your retirement savings in one account so you can easily monitor them. If you do it right, you might end up with nearly twice what you’re expecting to save.
Downsize your debts
If paying off all your existing debts sounds too difficult, you can always find ways to downsize them as much as you can. The first thing to take care of is your mortgage since it’s a big part of your financial commitments. Paying it off will greatly change your income-to-expense ratio for the better.
Take a look at your consumer debts like lines of credit or credit card debt. Starting to settle these will allow you to be more financially capable of saving for your retirement goals. You should also prioritize other significant debts like auto loans, student loans, as well as any personal loans. By downsizing your current debts and avoiding getting unnecessary ones, you can minimize the budget you need for paying off interest payments.
Check your insurance needs
A person’s insurance needs change as they get older. Do you require life insurance coverage? How about long-term care insurance? ; Review what types of insurance you might need for your retirement planning.
For instance, it will be beneficial to anticipate future health-care costs like home health aides. You can then consider long-term care insurance to help with the expenses. The best part is, buying such coverage as early as you can increase your chance of getting better premiums and avoid being rejected by insurance providers.
On the other hand, if you’re planning to go see the world when you retire, getting travel insurance is a good investment. While coverage specifics vary from provider to provider, most of them offer coverage for travel delays and emergency services. Think carefully about the extent of coverage you choose. Find the right insurance options based on your needs so you can have peace of mind where you can just enjoy your retirement life.
Regardless of your future plans and goals, keep in mind that starting early with your retirement plan could make a huge impact. No matter how small you save or invest, it can definitely go a long way. Use these tips and create a good retirement plan, and you can achieve that standard of living you desire for your retirement.