How Old Will You Be When You Retire? Tips To Get Started Today!
You have worked hard over the years and built a good life for yourself and your family – one full of achievements, memories and happiness.
Now, as you start thinking about getting yourself out of your soul-sucking 9 to 5 and retiring, you may have new goals and dreams in mind.
You retire from work, not life.
We all have our own ideas on how we want to spend our retired lives. This is why it’s imperative to have a strategy that’s specially designed to suit your unique needs.
So, how can you turn a comfortable retirement from a possibility into reality? Two words – retirement planning! I’m not trying to be cheeky—just practical.
You don’t need to be a Math genius.
Our retirement calculator will tell you whether you’re on track for the retirement you want and map out different routes to reach your target.
Retirement Planning
Retirement is something that you can be tempted to put off and worry about later. It may not be the top on your financial checklist — if you even got one.
This is especially true when you first enter the workforce. After all, you’re young and everything will take care of itself in the end, right?
Well…not particularly. Life doesn’t always work out the way you planned. A save-nothing approach can take a financial toll on you and your family.
Retirement planning is an indispensable part of financial planning. It means preparing for your future life today so that you continue meeting all your dreams and goals independently.
Not only does it warrant an additional source of income, but it also helps to fulfill life aspirations, deal with medical emergencies, and be financially free.
Retirement planning includes setting your retirement goals, approximating the amount of money you will need to lead a comfortable retirement, and investing to grow your retirement savings.
The following questions will guide you on proper retirement planning.
1. Where Do You Currently Stand Financially?
It doesn’t matter whether you plan to live a frugal or lavish lifestyle. The important thing is that you will need to have saved a certain amount of money by the time you retire.
If you’re on the right path, continue in the same direction. But if you’ve wandered in the wrong direction, you’ll need to take a step back and reevaluate your commitment.
2. Do You Understand Your Investment Horizon?
On the surface, retirement planning has not changed a lot over the years – you work, save and then retire.
The mechanics may be the same, but today’s savers face some unique challenges that older generations didn’t have to worry about. Like longer life expectancy, which means that you will need your money to stretch for longer – potentially into your 80s.
The first place to begin is to think about your investment horizon. To do this, you have to decide the age you want to retire and the number of years left until retirement. You also have to determine the duration you’re planning the expenses for.
Suppose you’re 30 years old, want to retire at 65 and plan for expenses until you turn 80. In this case, your investment horizon is 35 years. You should ensure that your current investments help you meet your expenses until you hit 80 – or even into your 90’s!
No one can truly predict exactly how long they will live, but having a ballpark estimate can go a long way in helping you decide how much you’ll need to have socked away.
3. How Much Do You Really Need to Retire?
This is the million-dollar question (plus or minus a couple of hundred thousands). And if you’re like the majority of Americans, you don’t have the answer to this question.
Your retirement will be more gratifying when your income is designed to fit your lifestyle choices, and you have established a retirement plan to safeguard the assets you have worked hard to acquire.
Retirement planning requires a balance of financial and personal planning. Personal planning is crucial as it’s the main determining factor in your retirement lifestyle contentment.
Many people entering retirement fail to place enough emphasis on personal planning to make sure they maximize their opportunities.
One of the most difficult parts of retirement planning is thinking about life as a 70 or 80-year-old. Many people get overwhelmed about saving for an unknown future, to the point of ending up not saving anything at all.
The best time to think about how you would like to spend your time during retirement is at an early stage in your planning process.
Depending on their circumstances and goals, one person’s retirement income needs will differ from the next.
Sit down, pick a pen and jot down your retirement goals on a piece of paper. Do you want to go back to college and pick up some special interest courses? Volunteer at a local shelter? Travel the world? Start and run that business you always wanted but never had the time for? As you can see, retirement options are endless.
These questions may seem inconsequential now, but they highlight some vital factors to consider when planning your retirement. Your choices will drive the financial circumstances that must be met to achieve your goals.
Next, think about how much everything will cost, from health care to housing to entertainment to day-to-day living. If it’s a big number, don’t fret. Time, tax breaks and the magic of compounding interest will give you the wind you need to propel your retirement portfolio returns (more on this below).
4. When Should You Start Saving for Retirement?
You should start saving for retirement as soon as you start earning.
According to a 2015 poll conducted by MoneyRates, individuals who started saving in their 20s were 66 percent more likely to be on track to retire by age 60.
Establishing a retirement fund at the early stages of life will help you amass a sufficient retirement corpus. By planning early, you can define the path to accomplish life goals without any financial dependence.
Unfortunately, most young people postpone planning for retirement as they think it’s 3 or 4 decades away. Telling young people to start saving for early retirement is like reminding them to eat their vegetables: They know vegetables are good for their health, but they’re unlikely to get excited about it.
However, you don’t want to wait for much beyond 40 as you will need time to stash money away in a retirement account for that money to grow.
Investing towards retirement in the early stages of life when your financial responsibilities are minimal will help reduce the burden of investing for it later.
By investing at an early age, you buy more time for your investments, and in the process, increase the effect of compounding on your investments, which is when gains grow on top of other gains.
Say you start saving for retirement at the ripe age of 25, put aside $6,000 a year in a tax-deferred retirement account for a decade, and then stop saving completely.
By the time you reach 65 (the normal retirement age), your $60,000 investment will have grown to over $700,000 (assuming a 7 percent annual return), despite you not contributing a dime beyond age 35.
Over time, that compound growth can really boost returns.
5. Which Accounts Can You Use for Retirement Savings?
How much you can save for retirement and the tax you may be required to pay varies depending on the account. You can build a nest egg quicker if you make optimum use of government programs and take advantage of workplace retirement benefits.
The lineup of retirement accounts is a huge bowl of alphabet soup. There is no single best retirement plan. Each plan has unique pros and cons. Some plans are pre-taxed, while others are post-taxed. There is likely an appropriate retirement plan (or combination of retirement accounts) for your unique individual needs.
In the End
Chances are, you do not plan to work until the day you die.
To lead a peaceful and uncompromised retirement lifestyle, it’s essential you start planning and investing towards it even if it seems a long way off. Professionals can help excel your retirement marathon; helping you navigate the latest rules and policies in a more efficient manner.
Finally, a retirement calculator can help you see your progress and what you need to change to attain your retirement goals. It might even help you to retire early!
