It’s essential to start planning for retirement as early as possible. Having a secure and comfortable retirement is something most look forward to, and many steps need to be taken to make that happen. Many people are intimidated when planning for their golden years, but it doesn’t have to be difficult when you use some of the following key retirement planning steps.
1. Determine Retirement Goals
Before you start planning, sit down and think about what you want to achieve and what you’re looking for in retirement. This will help you visualize what your goals are and what you’re looking for in terms of living comfortably in retirement.
Many don’t know whether to open an IRA investment portfolio or a 401k. According to the experts at SoFi in the content “Choosing between a 401k and an IRA is dependent on your needs for retirement and current situation. Many people actually choose to use both types of retirement accounts in their lifetime.”
2. Take a Long Look at Your Current Financial Situation
Before you start planning, it’s important to take a look at your current financial situation. Being realistic will help give you a clear idea of what you can expect to spend during retirement. There are a few questions that every person should ask themselves before they start planning. It’s important to ask yourself a few questions: What kind of debts do I currently have? Am I managing my expenses easily? Am I saving and investing appropriately?
3. Calculate Retirement Wants and Needs
Once you have rightly figured out what you want your retirement to look like and how your current financial situation looks, you can then calculate your retirement costs. This will help you see if you’re on track to meet those goals.
4. Review Assets and Income Sources
If you have identified the types of sources of income that will allow you to fund your retirement, then it’s time to start planning how you will contribute to that retirement. This can include traditional retirement, savings and home equity accounts.
5. Have a Plan for Unexpected Events
It’s important to establish a contingency fund to ensure that you won’t run out of money during unforeseen events. Having this type of fund can help ensure that your retirement funds are protected from unexpected expenses.
6. Determine Your Time Left for Saving
The length of time between today and retirement is also an important factor to consider when it comes to developing a retirement strategy. If you’re younger and have more than 30 years until retirement, invest most of your assets in stocks.
7. Calculate After-Tax Investment Return Rates
The real rate of return, which is the amount of money that you’ll need to invest to retire comfortably, is also calculated once the time horizons and expenses are established. Usually, a high real rate of return is not realistic for long-term investing. Since, as an investor, you’re required to pay taxes on the returns that you receive from your retirement accounts, you must know your tax status when you start taking withdrawals.
Planning for your retirement doesn’t have to stress you out. To plan successfully, it is important to start early and look into the investment options available to you.
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