As we shared in Planning for Retirement Part 1 – Taking Control of Your Finances, planning for retirement is the process of determining your retirement income and the actions and decisions needed to achieve it. Once you’ve learned the basics to understand, control and maximize your finances, it’s time to consider the details, from planning when you can retire to considering your options for retirement accounts. retirement and investments.
Before we dive into the actual retirement planning process, we wanted to reiterate some of the most important tips from Part 1:
Understand your finances, including your income, where your money goes, and how your spending habits affect your financial potential.
Have a budget and stick to it so that every dollar has a purpose.
Have a plan to grow your money, whether through normal savings, retirements or investments.
And last, but not least, have an emergency savings of at least
When can I retire?
The answer to this question comes down to when you want to retire, what you hope to accomplish after retirement, and when you will have enough money saved to replace the income you currently receive from work. In addition to being able to pay for your essential living expenses, you also need to have enough funds to be able to live life to the fullest after leaving the workforce.
Here are some questions you should consider when planning your retirement schedule:
How much do I need monthly to pay my bills?
Do I have major life expenses on the horizon?
How many debts do I have with me?
Will I qualify for
What do I want to do in retirement?
There are obviously a lot of things to think about when considering retirement. We suggest you meet with a wealth advisor to get professional information and discuss your situation. In the meantime, check out our library of retirement calculators to see how your current retirement plan prepares you for the long term.
The best retirement plan for me?
In addition to determining how much you need to save for your retirement, you also need to decide where to save those funds. Unfortunately, pension plans are not uniform, and depending on your employment situation, there are many different options to consider. The two most common options are:
401(k)s or other employer-sponsored plans
These accounts are generally the easiest to set up and manage, as employers offer automatic payroll deduction for retirement account deposits, leaving all other work to be done in the background by the plan administrator. of retirement. Your employer may offer to match some of your contribution up to a certain percentage – and you never want to pass up free money.
Individual Retirement Account (IRA)
If your employer doesn’t offer a retirement plan, your next best option would be to establish an IRA. These accounts allow you to choose the type of IRA as well as the institution through which it is funded.
Compared to workplace retirement plans, an IRA offers a much wider range of investment options. You can also decide how and when you get tax relief by choosing between a Roth IRA or a traditional IRA.
If you are self-employed or a small business owner, there are options for you as well. With SEP IRAs, solo 401(k)s and non-qualifying annuities, we suggest discussing these options with a financial advisor.
How do you know what to invest?
Another great way to save for retirement is to invest. This is a great question and something that should definitely be discussed with a trusted wealth advisor. Determining the right investments for your specific situation depends on how long you have until you need a return on funds and how comfortable you are with taking risk.
The general rule is to invest more aggressively in stock-based investments when you’re young, because you have more time for your money to weather market fluctuations. From there, you can slowly convert to more conservative options as you get closer to retirement.
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