Retirement planning is a process that should start with your first job. It requires having the capacity to leverage every vital financial planning steps you will make; having a retirement account being an integral element. You will not stay employed throughout your life, and your employer will only offer you a certain percentage regarding salary.
As such, you need to start planning for your retirement as early as possible. Getting your retirement plans on the right path involves more than just saving for retirement though this is one of the lucrative actions you should take along the road to a comfortable and contented retirement.
Getting your retirement plans on the right path involves more than just saving for retirement though this is one of the lucrative actions you should take along the path to a comfortable and contented retirement.
Before we begin to talk about the amazing plans, there are some questions that you should ask yourself. This is because the future (retirement) is as crucial as now (that you are still working). And it requires careful thought.
Retirement Planning Questions to Ask Yourself
How much money will you need?
This is, of course, one of the biggest questions. I hope you all have somewhat of an idea of how much you need. The last time I checked, I would need around $4.5 million to fully retire.
This all varies when you factor in a lot of different areas. Will your house be paid off? Do you plan on traveling extensively while in retirement? Do you have to pay for your health benefits?
Many think that they will need much less because most things will be paid off, but that’s not always the case. I’ve heard of people just planning on using 50% of their current income as what they’ll use when they retire! Usually, 50% will not be enough, unless you are already only living on one salary (and it’s working for you).
When do you want to retire?
I want to retire young. To do this, I need to start thinking of some ways for passive income to sustain me until I’m much older. I want to retire young so that I can experience and do everything while I’m still able to do everything.
How do you want to live?
Most people want to keep the same standard of living. It would be hard to live on less than what you’re used to, to make your money last. Will you travel to a bunch of places? Move closer to your family so that you can spend more time with them? Will you be a hermit or will you be trying a ton of new things?
Where do you want to live?
I would like to travel and live in other countries. Cost of living can be much lower in other countries, which could help you stretch your dollar much further.
I know Puerto Rico isn’t super far away, but when we went there on vacation last year, we met a lot of people who moved there and said that the cost of living is much cheaper and that living on the beach there is very nice. This is something that we have definitely considered.
Do you want to travel, work part-time or relax?
I would like to say that I would retire and just stop working altogether, but I doubt that will happen. I’m sure I’ll travel in the beginning, but after that, I would, of course, want something to fill my day. If not working at least a little bit (or having some passive income) then I would want to do something.
This could be volunteering also. I would love to dedicate my time to volunteering at many places such as shelters, food pantries, animal causes, and so on.
8 Retirement Planning Tips
1. Lifestyle and Living Arrangements
Next step is to look at the lifestyle you have now and the lifestyle you would like for retirement. Budget accordingly if you are planning to travel extensively. Do you have family that lives far from you and would moving closer to them be a goal of retirement?
Factor in the elements that are most important to you – I would suggest picking only two or three things that you would want to accomplish or indulge in once you’ve retired and asked others who are already retired and done something similar what hurdles you may need to cross.
No one knows what retirement is like better than someone already living it. While every generation will have its challenges, it’s good to get the perspective from retirees on retirement planning.
There are plenty of ways to have frugal fun, eat on a budget, and so on. You can even see the world, while saving for early retirement, too. Remember, the best things in life are free. The outdoors, spending quality time with those you love, laughing, and more are all FREE.
2. Know What You Need
Seek the services of a financial adviser, for any financial advice, is the cornerstone of proper retirement planning. Knowing what resources you will need to live on now and what you will need for retirement is the key to a comfortable and fruitful retirement. Set a solid savings goal. Think long-term and set a figure that you want to have saved and at an age that you want to retire.
Next, all you need to do is break down that goal into smaller sections for you to accomplish within a given timeframe. Set aside all or a portion of any windfalls you may encounter to help cushion your savings. You cannot save enough for retirement if you do not know how much money you will need.
3. Annual Portfolio And Savings Review
At the end of the year, it is imperative to review your IRA, 401K, savings, and other investments you’ve created for retirement and with the help of your personal banker, financial adviser, or accountant, see if you can invest any more into your pension for the year. In doing this, you maximize your retirement allotment and possibly shift you into a lower tax bracket.
As each state has its laws regarding savings and retirement, it is best to contact someone regarding what you can do to take advantage of your retirement planning.
4. Mapping Out Your Current Financial State
This is a simple listing of your assets and a good understanding of your income and near future income potential. Every month, I keep track of my net worth in a spreadsheet. This gives me a good sense of where our finances are right now and my projected retirement planning goals.
Every month, I update those figures and maintaining that a monthly snapshot is essential because it’s also check-in on our finances. I review my credit card statements, my bank statements, and double check everything is accurate and correct.
The second piece of your current state is a high-level understanding of your expenses. Your financial plan is about charting a path for your future and how you’ll get there through a mix of saving and asset growth. How much you save will depend on how much you earn and how much of it you spend – understanding that today is crucial.
5. Earn a Second Income
After the recent recession, there has been a significant emphasis on frugality. Here’s the issue – you can only really cut your expenses so much. Your expenses can never amount to $0 and there comes the point where you put so much stress on yourself to save money; it stops being rewarding.
On the other hand, your income potential is limitless. That’s one of the best things about starting a blog. For a minimal start-up investment, which includes $10 for a domain and less than $5 a month for hosting, you can build a business online. For fast loading, SEO-Optimized themes, I recommend Mythemshop – If you are looking for a sustainable side hustle, one that keeps on giving, then, blogging is one of the best ways to make money.
If you consider blogging as a way to make additional money on the side or to even replace your day job income, you can start your blog with my special, negotiated price of $3.95/mo versus the regular price of $7.99/mo. That price can’t be beaten. For the cost of a coffee fix, you can have your blog and start monetizing it. Who doesn’t like that idea? I know right.
But, starting a lifestyle blog doesn’t need to be your only source of online income – your website can be a marketing tool for freelance services, such as writing, editing, graphic design, or social media management.
The best part of this strategy is that, while your blog grows gradually, you can supplement your income with immediate cash from freelance work. Blogging had the greatest impact on my retirement planning.
6. Investment For Retirement – Start Early
Retirement planning for the future can be tough. Especially when you’re flying solo. Here’s how to plan for retirement for single moms.
While there are many different investment strategies and opportunities, the most common vehicle is the stock market. Unfortunately, if you don’t know what you’re doing, the stock market is one of the easiest ways to lose money. Yet not all is lost if you want to open a brokerage account and start investing wisely.
A low-cost index mutual fund from Vanguard or Fidelity can do it all for you. Index funds are constructed to match the components of a specific market index, such as the S&P 500 Index, thereby providing broad market exposure.
This means that, instead of becoming a stock picker and choosing which specific company’s shares you want to buy, an index fund automatically diversifies your risk by exposing you to hundreds of different stocks.
However, Vanguard and Fidelity have minimum account balance requirements that some young or first-time investors may not meet. If that’s the case, discount brokers called robo-advisors are a great option because many of them have no minimums. You can start with as little as you want and make a monthly contribution to grow your retirement account.
Ultimately, starting young and minimizing costs is crucial. From the beginning of 1980 to the end of 2014, the stock market has averaged a 10.13 percent annual return, despite the United States experiencing 4 recessions in that time period. While past performance is not an indication of future returns, you can bet that it is in the best interest of Wall Street to keep the market trending higher in the long-term.
Even though insurance is an exceptionally important concept. For example, what if you could guarantee, that if the worst case scenario played out and you died unexpectedly, your young children and financial dependents would be taken care of? Isn’t that peace of mind worth something? Well, that’s what life insurance is.
If you are a fan of this blog, there is a good chance you are a mom, and I know every good mother worries about their kids, so what about your children? Who would take care of them? Term life insurance is designed to pay out a death benefit (lump sum cash payment) to your beneficiaries if you tragically pass during the term period, which can be 5, 10, 15, 20, 25 or 30 years.
So, if you’re a healthy, non-smoking 30-year-old mother, you can buy a $500,000 term life policy for 30 years of coverage for $350 to $450 per year in premiums for a flat rate, that comes out to $30 to $38 per month. But you don’t have to take my word for it. You can always get free quotes online from some of the top life insurance companies.
However, under no circumstances should you buy a whole life insurance policy. Unless you’re wealthy, any agent, broker or representative who tries to sell you a whole life policy is a red flag. And for that matter, if you’re healthy, there is also no reason to buy a guaranteed issue, no medical exam, or high-risk life policy. Really, if you need life insurance, stick with a very affordable term life policy and you shouldn’t have any problems.
8. Cut Your Housing Costs
If you’re like most Americans, your biggest expense—and thus your most significant opportunity to save—is your home. Housing costs devour a third of the average budget, according to the U.S. Bureau of Labor Statistics.
Are you thinking of buying new digs? Stay put if your home is big enough, or at least say no to buying the biggest house you can afford. It is better to use the savings for retirement planning.
Consider a hypothetical family in the Minneapolis area, where prices are in line with the U.S. average. They would save more than $50,000 over 10 years by staying in a starter home vs. upgrading to one 30% bigger, according to Keith Gumbinger, a vice president at mortgage-information website HSH.
That estimate includes mortgage, property tax, insurance, and utility and maintenance costs. HSH and other firms offer online calculators to help you determine the maximum mortgage you can swing based on your income and other financial details. But “you don’t have to borrow the max,” Gumbinger says. If you are looking to power-save, keep your housing spending to 30% or less of income, he says.
Retirement planning in advance doesn’t need to be expensive or time-consuming, but the dividends can be substantial. A solid plan starts with clear goals, both short-term, and long-term, and knowing what it takes to reach those goals. Reviewing your plan annually keeps you up to date on how you are doing on those goals.