From the initial step of saving for retirement to the decision of when it’s the right time, planning for your retirement is a major step. If you have decided to retire it is important to understand the current benefits and resources available.
In addition, you may give some thought to the changes in your lifestyle. In some cases, many retirees consider retiree jobs as a way to keep themselves connected and continue having a sense of purpose. Others take take advantage of the extra time to travel the world or visit family members more often.
The Planning Process
Once you have decided to save for retirement, consider creating a list of steps to help you reach your financial goal. Below are a few factors to consider:
- Organize your money – Get your finances in order. Know what you have and what you’ll have to live on. Track your spending, old pensions, state pensions, and check all other benefits you can file a claim for.
- Start early – Start saving and putting away money now. The power of compound interest is key to your future earnings. Putting away money starting at a young age.
- 401(k) – Contribute to your 401(k) if your employer offers a traditional package. Ask if you are eligible and start contributing pre-tax money. Learn about your tax bracket since money will be coming out before federal income taxes are taken into consideration.
- Automate Savings – Making your contributions automatic each month will allow for funds to be saved even when you have forgotten. This is money you won’t think about until you see it when approaching retirement. Grow your nest egg.
- Consider IRA options – There are two types of IRAs. A Traditional IRA may be tax deductible. This type of account may for you depending on your income and whether or not your spouse has a workplace retirement plan. A Roth IRA is the better choice for you if you meet the phase out income limits, which are based on your federal tax filing status. “ Whether you are eligible to contribute to a Roth IRA is based on your MAGI. The tax laws limit the eligibility to contribute to a Roth IRA based on MAGI ranges that are published annually and correspond to your federal tax filing status — if your MAGI is less than the lower limit, you are eligible to contribute up to the annual contribution limit for the year; if your MAGI is between the limits, you are eligible to make a partial Roth IRA contribution; and if your MAGI is above the upper limit you are not eligible to contribute to a Roth IRA.”
- Smart spending – Look at your budget. Daily, week, monthly budgets, depending on your income and lifestyle choices. Talk with your loan officers, think about negotiating a lower rate on your car insurance. Transfer your credit card balance to a lower interest rate. Consider changing habits in your lifestyle like bringing lunch to work instead of eating out.
- Set goals – Knowing how much you will need and want to save for retirement is key. Set benchmarks and set goals that are attainable. Seeing those goals will be rewarding and encouraging.
- Talk to an advisor – Speaking with a financial advisor about your retirement goals is important if you have doubts and questions as to how to get there. Financial terms and policies can get complicated so having an expert lead the way is always a positive step towards success.
Calculating Your Retirement
Financial companies offer resource tools like calculation tools to help determine at what age you should or could retire based on the amount that you are investing/saving. Online budget worksheets and cash flow calculators are tools to help you point out where your money is going and when. Talk to your financial advisor to find out which options are available for your situation.