Retirement Planning Guide
Retirement planning refers to the process of preparing for retirement, including saving money and figuring out how much income you’ll need to live comfortably. It’s important to start planning for retirement as early as possible, so you can make sure you have enough money saved up.
Retirement can be fun if planned well. It’s also very important because once you retire, you won’t be making any more income. If you haven’t adequately planned for retirement, it can get very expensive.
How Can Retirement Planning Help?
Planning for retirement can benefit you in a number of ways. The benefits include:
Allows You to Reach Your Retirement Goals
A retirement plan helps you determine how much income you’ll need, so you can work toward saving that amount. Once you have enough money saved up, you can retire whenever you want.
Maintains Your Standard of Living
Having a plan means knowing how much money you’ll need to live well. You can adjust your retirement savings anytime, so if something unexpected happens and you need more you can make adjustments to ensure your quality of life won’t suffer.
There are many different avenues for saving money, including 401(k) plans, Roth IRAs, investing in the stock market, etc. Comparing these options ensures that you’re getting the most out of your investments for when it’s time to retire.
Helps You Deal With Unexpected Events
Since no one knows what will happen day to day or even year to year, it’s important to plan for the unexpected.
With a good retirement plan in place beforehand, then it won’t be as expensive if something bad happens later on down the line. This is especially true when considering healthcare costs because they tend to increase dramatically as people age over time.
Gives You Time To Prepare For Retirement
Setting goals and planning well ahead of time allows you to make changes gradually instead of all at once. Having a retirement plan gives you time to save money, adjust your budget and make other preparations.
Steps in Retirement Planning
There are a few key aspects you should include in your retirement plan:
1. Determine your retirement age.
The earlier you retire, the less income you will have over the course of your lifetime because you’ve been saving money from a job for fewer years.
If you want more money during those post-retirement years, consider retiring later and making some sort of income during that time too (e.g., part-time work).
2. Calculate how much you’ll need to save every month.
This number can vary depending on your lifestyle and goals for retirement. You should make sure you save as much money as possible so you don’t have to worry about money when it’s time to retire.
3. Consider what type of lifestyle you want in retirement.
Do you want to travel? Spend more time with family? Or live a more simple life? Knowing this will help determine how much income you’ll need each month.
4. Figure out how much income you’ll have from pensions, Social Security, and other sources.
Many people rely on these sources as a main income source for retirement, but it’s important to have other plans too.
While still working, make the most out of employer-sponsored retirement plans, such as 401(k) plans.
5. Plan for the unexpected.
No one can predict what will happen in 10 years or even a few months from now. Having money saved up and a budget to follow is especially helpful when dealing with unexpected events like a major illness or injury.
If you plan well enough ahead of time, it will be easier to adjust your spending habits without going into debt too much.
6. Make a budget for when it’s time to retire.
Knowing how much money you’ll have coming in each month after retirement is just as important as knowing how much you’ll need to save monthly while still working towards your goal of retiring early enough so that your money lasts throughout your lifetime.
This will help you figure out how much money will be going towards essential necessities and allow you to save more if necessary.
7. Get help from a financial advisor.
Retirement planning can be overwhelming, but it’s important to have someone to help guide you through the process. A financial advisor can help you compare different investment options, set realistic goals and create a plan that will work best for your unique situation.
It’s important that you get help from someone who is knowledgeable about finances and retirement planning, whether it’s an online service or a personal advisor.
The Bottom Line
Planning for retirement is one of the most important things you can do for yourself and your future. It’s never too early or too late to start saving money and creating a retirement plan.
With careful planning and some sacrifice, you can enjoy a comfortable retirement without worrying about money.
About the Author
True Tamplin, BSc, CEPF®
True Tamplin is a published author, public speaker, CEO of UpDigital, and founder of Finance Strategists.
True is a Certified Educator in Personal Finance (CEPF®), a member of the Society for Advancing Business Editing and Writing, contributes to his financial education site, Finance Strategists, and has spoken to various financial communities such as the CFA Institute, as well as university students like his Alma mater, Biola University, where he received a bachelor of science in business and data analytics.