Posted by Tiffany Gaskin

The Dos & Don’ts of Retirement Planning

The Dos & Don’ts of Retirement Planning

One of the most critical stages in the life of a human is retirement. With the life expectancy of typical humans increasing, it is essential to make an adequate retirement plan.

While planning for retirement might seem overwhelming, there are some points that can get you started on the right path. This article will discuss various Dos and Don’ts of retirement planning.

 

To establish your goals.

Your goal involves you having a plan that will guide your lifestyle after retirement. For instance, 

  • When do you plan to retire?

  • How do you intend to live after retirement?

  • What do you need to meet the retirement needs?

There are many questions you need to ask, and this can give you a head start. You might assume having $10 million will make your life easier after retirement, but you need a lot to figure out what you need and how to make it happen. 

Make sure your goals are defined and attainable. Ruminate on the age you will like to stop working, which will give you the number of years you have left and what you can save. This involves a knowledge of the planned retirement expenses and the time frame to cover such costs. 

Don't forget other goals you might possibly have for retirement, like a beach house, a boat or a trip to Hawaii. When you know your retirement plans, you can estimate what you need. 

As you plan, be sure to factor in inflation. This means that the value of $5000 will undoubtedly be lower in 20 to 30 years from today.

 

Don't Postpone Planning. 

Many people believe retirement is pretty far, but time has mastered the art of sneaking upon humans. In other words, do not wait until you have five years to retire before you start planning but think about it today.

You might be in your 20s or 30s and just entering into the career world, or you might be in your 40s or 50s and getting close to retirement. Having a plan can be your ticket to a successful retirement.

 

Do Commence Saving and Investment Asap

It is essential to commence retirement saving as soon as you can because waiting till later might be plain uncomfortable as one will need to save more to catch up.

For instance, you begin saving $2,500 a year when you are 25. With a 5% rate of return, your savings will have been $300,000 in the next 40 years. Waiting till age 40 to commence saving will imply saving $6,300 annually for 25 years. If you wait till age 50, you will save $14,000 per year for 15 years.

No matter the investment portfolio, getting started as soon as possible is the best bet.

 

Don't Depend Excessively on Social Security. 

Social security is a tool provided by the government to fund retirement. A typical American will need to work for ten years to qualify for social security benefits. The benefits include Medicare, retirement and disability income, Medicaid and survivor benefits. 

One can access social security as early as 62 years, depending on the birth year. As a rule, social security benefit rises (higher monthly payments) the longer you wait to activate it until age 70. The majority of American workers and employers send funds to Social Security via payroll deduction to be classified as a lifetime monthly income for retirement. With the growth in population and people living longer, there is a concern that the program might be unsustainable in the future. 

As a result, one needs extra savings as part of the plan for retirement, which will help remove excessive dependency on Social Security Income.


Do Prepare for the Unplanned

There are many uncertainties in life, with things changing without any warning. Even though only a tiny fraction are gifted with the ability to predict the future, one can prepare for any emergency and strategically position yourself to handle any unexpected expenditure. Such could range from a vehicle breakdown, a major house repair, loss of income because of a spouse's death, etc. 

You can decide to insure your retirement asset, transfer the risk to an insurance firm, etc. Make sure to prepare for any unforeseen happening, to avoid surprises in retirement.


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Tiffany Gaskin
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