Retirement planning is vital to living the lifestyle you want as you age. Unfortunately, many people fail to think about this crucial step until it’s too late.
Don’t be one of those people! Read this article, which will give you the basic components of planning for retirement as well as a range of options for helping you to develop a comfortable income after you retire.
When it comes to preparing for your retirement, the earlier you start, the better. And although the temptation is to focus on how much money you will have when you retire, there are several other aspects to consider when mapping out a retirement game plan. Following is a brief description of the basic components that compromise a thorough one.
1. Age at which you hope to retire.
Did you know that if you are under thirty-five years old, retirement in twenty years or less is possible? If you make the right choices, you can have a big enough nest egg well before age fifty-five that will enable you to withdraw from it annually and still watch it grow.
2. What you will do after retiring.
No matter what age you retire, this is a crucial step in your retirement planning. Especially if you plan to retire in your forties or early fifties, you need to have a clear idea of how you will spend your freedom. Will you develop a small business idea? Write books? Volunteer? Work a low-stress part-time job that pays the bills, and use retirement money to travel?
Even if you plan to retire at an older age, you still should have goals. The healthiest and longest-lived retired people are those who stay active.
3. How to get out of debt.
Entering retirement with any kind of debt significantly reduces your financial security. If you have any kind of debt – including car payments and/or a mortgage – a huge part of your retirement planning should include eliminating that debt ASAP, and staying out of it for the rest of your life.
4. Where you will live.
When you’re five to ten years out from retiring, start thinking about where you want to live, given your financial situation. Will you stay in your house, or move into a condo in a retirement community? Will you change your geographical location? If you want to retire to a place with a higher standard of living than where you are now, you will need to be even more diligent when planning for your retirement.
5. How much money you will need for retirement.
Here is the component of retirement planning that receives the most attention, with good reason. If you don’t have a big enough nest egg to last you until death once you quit working for an income, stress and misery are likely to become your constant companions.
So how much do you need to have saved up by the time you retire? Ideally, you will have enough invested in a retirement vehicle so that you can take out and live on between five to eight percent of the investments every year, and still they will continue to grow.
You may think you would never be able to save up that much money. Consider this: if you invest $100 every month into a mutual fund that averages 12% growth, after forty years you will have well over a million dollars. If you can invest several hundred to several thousand dollars every month, the million dollars will come much sooner.
Retirement planning is crucial for your future. Start the process today!