`Sitting peacefully on a patio chair, holding your favorite beverage enjoying the soothing breeze, is a dream we all have. After spending the majority of our life in the capitalist race, we do deserve the peace of mind.
While the situation is ideal, is your financial situation too? According to the official financial health report 2020, only 33% of Americans are financially healthy. So, if in youth you are not financially healthy what will happen in retirement?
In today’s economy, it is essential to plan your retirement in your youth so you can enjoy growing old.
Setting an age when you want to retire depends on your personal goals and income. In the next five years would you have enough income and investments to retire at an age you want? Or would you like to retire at an age you can enjoy the benefits given by the state?
The earliest social security benefits start at 62. You still can file a retirement earlier but a portion of your benefits will be sacrificed. if you delay your retirement till 70, you enjoy additional benefits.
Five Steps To Plan Your Retirement Easily
If you are at a stage where there is potential for financial growth, you don’t need to decide an earlier or late age to retire as of now. However, you should start with your plan right away. Below are the core points of creating a retirement plan.
- Know When To Start:
As mentioned earlier, it is not important when you want to retire as compared to when should you start investing in your retirement plan.
The simple answer is that you should start investing in retirement by the mid-’20s. By mid 20’s and counting majority of us are at stable workplaces. The earlier you start, the more time, energy, and resources you have to invest in your future.
- Calculating Money:
Money is calculated keeping in mind what your insurance and social security would cover in the near future and if you are planning a change in the standard of life. Typically you replace 70-90% of the pre-retirement annual income through social security benefits and saving.
However, in the early stages, you calculate the money you will need for the investment with a profit margin.
- Set Priorities:
Once you graduate from college, the first thing in your mind shouldn’t be a retirement plan. Why? because several other areas need your financial attention first such as paying off debts, emergency fund, family support, and traveling goals.
In the early stages, the financial strength is almost non-existing, and stressing over retirement plans is just burdensome. Don’t do that!
A retirement plan should be last on your priority list and the big chunks of your money should be allocated to paying off debts and other goals. Your retirement money is supposed to grow gradually in the 30-40 years.
Even in a retirement plan, you can set priority whether you want to save money for a retirement plan first or your independent investments.
- Choose Retirement Plan:
Most employments do offer retirements but in case your workplace doesn’t, you still need one. Always opt for a retirement plan that suits you the best. If the company retirement plan does not match, you can either opt-out completely or consult a professional to merge yours.
The most common type of retirement plans includes 401(k), Traditional and Roth IRA. self-directed and simple IRA, SEP IRA, and solo 401(k).
- Invest:
Oftentimes social security benefits, and income tax returns do not offer much in areas other than medical care and basics. To afford luxuries after retirement, investment is important and, in most cases, your only savior. Investment money for retirement comes a little in life once you are done with the majority of the debts (remember priorities).
The most common type of savings includes stocks, bonds, and mutual funds. While investing go for a less potentially risky investment but always remember there is a chance of loss.
How can you tell that your retirement is not going right?
A retirement plan although easy can be messed up or clustered. The main purpose of planning retirement to stay stress-free in the present and the future. If your retirement plans are influencing your current standard of living and paying off debts then you are pushing too hard. To keep everything aligned you can choose a personal finance app. An app can help you track the money going towards your expenses, debts, and retirement plan.
