When you’re busy working your way to the top of the ladder in the corporate world, you may not be thinking about your need to prepare for retirement.
You have plenty of years left to work and you can think about that later — right?
Not so fast. Even if you don’t want to retire early, you might be surprised how much it can cost you even after the kids are gone. Continue reading this article to learn about preparing for retirement no matter what your age is.
Must-Know Facts When You Need to Prepare for Retirement
Experts like Mark Tudor can give you guidance in wealth management but if you don’t take the proper action, there’s no hope. These tips will help set you on the right path so you can have peace of mind.
Determine What Age You Want to Retire
The younger you want to retire, the more money you’ll need throughout retirement — obviously.
One of the things you have to think about is whether you want to continue working for a few more years to sock away more money or if early retirement is worth it.
You could also consider partial retirement. Even having a part-time job can help with your lifestyle. While you don’t have to overwork yourself, you also don’t have to retire all the way unless you’re just ready to soak up as much sun as possible.
Determine How Much Money You’ll Need
Once you figure out what age you want to retire, you’ll need to determine how much money you’re going to need throughout your retirement years.
Keep in mind that our life expectancy is increasing with the advancement of modern medicine. You don’t want to run out of money before you’re gone. It’s better to have money left over to will to your children instead.
Figure out how many years you’ll be living in retirement and then look at the sources of income you’ll have.
Some people don’t believe social security is going to make it much longer but you’ll have to determine whether you want to count it or not. If you do want to count future social security benefits, estimate these as closely as possible.
You also want to figure out how much money you’ll be getting from any pensions or annuities.
These are the most common sources of income people in retirement have but if you have other sources of income, factor those in as well.
Once you know how much money you have coming from these sources, that means the rest is up to your savings. You should save enough money to maintain your current lifestyle or even better than the lifestyle you are currently living in. You don’t want to go backward in life or you might find yourself resenting retirement.
Don’t Forget Inflation
When you’re doing your calculations, make sure you don’t forget inflation. What might be a good chunk of cash right now might not necessarily be a good amount of money when retirement comes.
Use 4% inflation annually just to be safe so you don’t underestimate how much inflation is going to take a bite out of your money.
Hope for the Best & Plan for the Worst
The best way to plan for your retirement is to hope for the best and plan for the worst.
If you have a major health problem — do you have the money to take care of it? There’s dental work and other things to consider.
You may want to help out your children or give them gifts for their weddings or even your grandchildren’s birthdays and weddings.
If you don’t factor in these expenses and things that might set you or your family back, you may find yourself wanting to help but being unable to.
Set aside an emergency fund so you never have to tap into your money for monthly expenses. If you have to tap into your money for monthly expenses, you’ll need to find a job or other gig to replenish your savings.
Now that you’re thinking about retirement, you might not want to take care of everything on your own. People that aren’t great with finances may want to speak with a wealth management professional.
You can talk to various types of money experts but the most common type is a financial planner. You most likely know at least a couple but make sure you choose someone that has a proven track record or is working with a proven mentor.
When you entrust your finances with people you shouldn’t feel bad about doing your due diligence. If you have a shorter time until retirement, you are likely to feel you need a more aggressive plan than someone that is far away from retirement, but you need to be careful.
If you are too aggressive when you’re close to retirement, you could ruin your finances and have a deep hole to dig out of. If you’re still young and have a lot of earning years ahead of yourself, this makes it easier for you to recoup any losses.
Ready to Plan for Your Golden Years?
Now that you understand you need to prepare for retirement, what else are you thinking about?
Maybe you’re thinking about what fun things you’re going to do when you retire. Maybe you want to figure out how you can buy your dream beach house where everyone can visit and enjoy.
Continue reading our articles today to get inspiration for your life after work.