How to Develop a Retirement Plan That Will Keep You Financially Secure
Retirement may seem a hundred years away, but chances are it's not. In fact, it's much more likely that it will be upon you before you know it, and you'll be left wondering where the time went. Don't leave your financial security in retirement to chance. Instead, take steps to develop a solid plan that can help you maintain your lifestyle even after you leave the workforce. These suggestions can get you off to the right start toward planning your retirement strategy.
Set a Timeline for your Retirement
In order to develop a plan for your retirement, you will need to establish a timeline. Whether you are planning to retire early or work longer will have a serious impact on how your plan develops.
Decide at about what age you would like to retire. Maybe you absolutely love what you do and plan to stay as long as you are physically able. Take employer pension provisions and what age you want to start drawing social security into account when making this decision.
Are you planning on working part-time after you retire? Many people decide to do this to extend their retirement savings. Others find they have no choice. Being prepared can help you avoid having to find another source of income in your golden years.
Calculate How Much Income You Will Need
If you are like most people, you are planning to rely heavily on Social Security to make up for your income once you retire. However, the average monthly social security payment is only about $1,500, which may not make up for the 80 percent of your working income you will probably need to take home.
Use a retirement calculator to figure out how much you are going to need to live in the manner you are used to. Then, determine how much you will have to save for retirement.
Start Planning Early
The sooner you start the retirement planning process, the better off you will be. This gives you the most amount of time to take advantage of the compound interest on your investments. It also sets a healthy habit of saving. The reality is, you are never too young to start saving for retirement.
Yes, in today's instant gratification world, it can be really difficult to put money away for something that is decades ahead of you. But, if you want to be financially stable in retirement, having more time makes it easier.
That doesn't mean you shouldn't start saving if you are already nearing retirement age. By all means, put whatever you can into investments that will offer a reliable income during your retirement. Look at investments like rental properties that could offer passive income streams.
Consider Retiring in Stages
Retiring in stages can make sense for a number of reasons. Not everyone is ready to pack up their office and walk away in a single step. Planning to transition to a part-time position can let you stay in the game on a more limited basis. Maybe your company is interested in hiring you to work on difficult or extra cases as an independent consultant. Then you can set your own terms for schedules and payment to make sure that you have the best of both worlds.
Find a Strategy You Are Comfortable With
No matter how you plan to spend your retirement, you will want to ensure that you invest your money in a manner that you feel comfortable with. Take the time to assess your investing personality and understand your risk tolerance, and act accordingly.
Keep in mind that your investment strategy will probably change over time. While aggressive options are popular in younger people, you may want to keep your nest egg in a more secure vehicle as your retirement day gets closer. That is why it is so important to have a solid timeline in place.
Your retirement should be a time to enjoy things you didn't get to do while you were part of the daily grind, not a time to stress about finances. Take action now to help make that a reality.