Retirement Planning Made Easy: A Comprehensive Guide
Be Retirement Ready: How to Plan For Your Golden Years
Retirement may seem like a distant dream, but it can be within reach when you follow a process and have a trusted partner to help you. By creating a retirement budget, reviewing your savings and investments, and working with a financial advisor (be that Infinium or someone else), you can ensure that you have the tools and knowledge you need to enjoy a comfortable and secure retirement.
This article will provide an example of how to look at setting up your retirement plan step-by-step. No plan is any good unless you spend time on it, so read on to take the first step in the right direction for your Golden Years to come:
Create a Retirement Budget
Start by creating a retirement budget and determine how much money you will need to save to maintain your desired lifestyle during retirement. Take into account any sources of income you will have, such as social security or a pension. Calculate how much you need to save for retirement by dividing your annual expenses by the years you have until retirement.
This will give you the amount to put away each year for your savings to grow enough to support your desired lifestyle in retirement. Next, determine how much money you are currently saving and set up an automatic transfer from your checking account into a separate saving account each month.
Review Your Savings and Investments
Next, review your current savings and investments and determine if you are on track to reach your retirement savings goals. If not, consider increasing your contributions to retirement accounts such as a 401(k) or IRA.
If you need to save more to reach your goals, consider ways to increase your contributions. You may also need to reduce spending to make room in your budget for retirement savings.
If you have already saved as much as possible and are still failing to reach your goals, consider other ways to increase your savings. Some options include downsizing your home, working longer, and delaying retirement.
Work with a Financial Advisor
Research financial advisors and consider working with one to develop a comprehensive retirement plan. But buyer beware – there are tons of highly unqualified salespeople out there posing as financial advisors. Key things to look for are financial advisors who hold the title of Certified Financial Planner™ and are considered Registered Investment Advisors (RIA). An RIA is a fiduciary that must always put your needs and objectives before their own.
This plan created with a trusted advisor should consider your unique situation and goals and help you maximize your retirement savings. The right financial advisor can help you determine your retirement savings, assess whether you are on track, and suggest ways to get back on track if you have fallen behind. A financial advisor can also assist with the following:
Determining how much money you will need in retirement
- Calculating your current savings and income to see if they’re enough for the lifestyle you want in retirement.
- Recommending strategies for saving more money over time and building a solid foundation for your retirement funds
- Helping you understand how the market works, such as how interest rates impact your savings
- Guiding investing in stocks, bonds, and other assets
Educate Yourself About Retirement Planning
In addition to creating a retirement budget and reviewing your savings and investments, take the time to educate yourself about retirement planning. This can include reading articles and books or attending seminars to learn more about the best strategies for achieving your retirement goals. The more you know, the better prepared you will be to make intelligent financial decisions to help you achieve your retirement goals.
Understanding the types of investments available and how they work is also essential. This can help you make sound investment decisions for your retirement funds and avoid making costly mistakes that could jeopardize your future security.
Consider the Non-Financial Aspects of Retirement
As you start planning for retirement, remember to consider the non-financial aspects of retirement. This can include how you will spend your time, where you will live, and what you will do to stay healthy and active.
A comprehensive retirement plan considers all aspects of your life and how they will change when you retire. It’s essential to understand the financial implications of these changes so that you can make informed decisions about your future.
Considering these factors, you can ensure that your retirement is fulfilling and enjoyable.
Develop a Comprehensive Retirement Plan
Continue working with a financial advisor to develop a comprehensive retirement plan that considers your unique situation and goals. This plan should include a detailed investment strategy and guide on maximizing your retirement savings.
The plan should also include a strategy for managing your tax burden, an important consideration when planning for retirement. A retirement plan can help you stay on track with your goals and give you the confidence to do everything possible to ensure a comfortable and secure retirement.
Evaluate Your Potential Sources of Income
As you approach retirement, evaluate your potential sources of income, such as social security and any pensions or annuities you may have received from previous employers. It also helps to consider other sources of income, such as a part-time job or a reverse mortgage.
Depending on your retirement savings, you may need additional income to live comfortably in retirement. If you seek a part-time job, factor the payment into your retirement savings plan.
The same is true if you have other sources of income, such as interest earned on investments or rental income from a property owned by your company. Remember that social security benefits are subject to taxes and that exceeding certain thresholds may reduce your pension payments.
Research Healthcare Coverage Options
Consider your healthcare needs in retirement and research your options for healthcare coverage, such as Medicare. Determine how you will pay for healthcare expenses and consider purchasing a long-term care insurance policy to cover potential long-term care costs. Be sure to research your options for coverage and understand how each plan works before buying a policy.
Remember to exercise and eat a healthy diet to maintain good health and reduce the risk of expensive medical bills, which can be one of the most significant expenses for retirees.
Start Making Changes to Your Savings and Investments
As you continue to develop your retirement plan, start taking steps to implement it. This can include making necessary changes to your savings and investments to align with your retirement goals. For example, if you want to retire early and have a large target date fund in your portfolio, consider gradually moving it into a target retirement fund that gives you more flexibility in using the money.
You may also want to make other changes as well. For example, if you plan on working part-time after retiring, consider lowering your allocation of stocks and shifting some of those funds into bonds. You can also create a plan for how you want to use your investments once you retire.
If you want to live off the money in your retirement accounts, consider moving them into annuities that provide guaranteed income. If you still need access to some of the funds, keep them in a brokerage account to be available if an emergency arises.
Take Steps to Implement your Retirement Plan
Between your third and fifth year, you should take steps to implement your retirement plan. This means transferring funds into an IRA or 401k (if you haven’t already done so), making sure you have a will and other estate planning documents, and figuring out what financial products to use when you retire. You can also take advantage of the year-end tax benefits to maximize your retirement savings.
Diversify your investments to include a mix of stocks, bonds, and other appropriate investments for your age. You should also keep an eye on long-term trends like interest rates and inflation to adjust your portfolio if necessary.
Review and Update Your Plan as Needed
As you approach retirement, it is essential to regularly review and update your plan to ensure it continues to meet your needs and reflect any changes in your circumstances. This may include reevaluating your retirement goals, adjusting your savings and investments, revisiting your living arrangements and healthcare coverage options, and working with a financial advisor to make any necessary changes to your plan.
When reviewing your plan, consider factors such as changes in your income, expenses, and overall financial situation. This can help ensure that your plan remains on track and that you are ready for retirement.
Additionally, keep an eye on changes in the broader financial and economic environment that may impact your retirement planning. This may include changes to tax laws, interest rates, and investment markets. By staying informed and adapting to these changes, you can help ensure that your plan continues to meet your retirement goals.
Overall, regularly reviewing and updating your retirement plan is an essential part of the planning process. By continuously monitoring and adjusting your plan, you can ensure that you are on track to enjoy a successful retirement.
Take Control of Your Retirement
As you approach the end of your working years, carefully considering how to support yourself during retirement is essential. Creating a retirement budget is a crucial first step, as it allows you to plan your financial needs and ensure sufficient income to cover your expenses.
Working with a financial advisor can also be beneficial, as they can help you prioritize your retirement needs and develop strategies to meet them. In addition to your financial needs, evaluating other potential sources of income and healthcare needs is essential. This can help you identify any gaps in your retirement plan and take steps to address them.
Overall, it is essential to take a comprehensive approach to retirement planning and create a viable budget that accounts for all expenses and savings goals. This can help you achieve financial security in retirement and enjoy the lifestyle you want.
Mark is a +24 year financial advisor veteran and Certified Financial Planner™. He founded Infinium in 2009 to bring a more personal, and truly client-centric offering to investors.