Retirement is a gift, a reward for long years of service, and a chance to enjoy the fruits of your numerous years of work. It brings the perfect opportunity to spend time with family, take long walks on the beach, and travel around the world to see it all.
Most people work their entire lives in order to retire comfortably one day. But, there is no fixed age for retirement, although the current retirement age in the US is 62. Some people retire as early as in their 40s, while others work well into their 70s and even 80s before hanging the boots.
Regardless of the retirement age, one thing is certain… while some people will enjoy comfort in their retirement days, others will live in complete misery. It all comes down to one big skill — retirement planning!
Start planning for retirement! You owe it to yourself and your family. Let’s help you prepare for retirement. In the lines that follow we’ll walk you through the most important steps in the retirement planning process.
What is Retirement Planning?
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Retirement planning strategies are a set of financial methods for saving, investing, and ultimately distributing money in order to live well in retirement. To get ready for retirement you should save money, avoid early withdrawals, and make prudent investments, among other sacrifices.
But preparation for retirement doesn’t only involve financial planning, it must involve all other facets of life. Non-financial considerations include lifestyle decisions, such as how to spend time in retirement, where to live, and when to retire fully.
Why Is it Important to Plan for Retirement?
They often say to retire comfortably, $1 million is the goal. In fact, the average American believes that they need $1.04 million to retire comfortably, yet the median retirement savings for all workers is only $97,000.
Too many Americans are far from their retirement goals, and this is primarily due to poor planning.
Here’s why it’s important to plan for your retirement well ahead of time.
- Planning reduces your stress levels, hence better health: financial problems can bring anxiety and worries, so taking the steps to prepare to retire will be good for your physical and emotional health
- Planning helps you answer some crucial questions:
- What kind of accounts should you consider?
- Do you need life insurance?
- How do you reduce volatility in your portfolio?
- What are the financial issues you should resolve as soon as possible?
- Should you take your pension as a lump sum?
- What mix of investments is best for you?
- Retirement planning helps you pay less money in taxes: For example, contributions to your employer’s 401(k) plan can lower your taxable income. Qualifying for a savers credit, building a tax-free savings bucket with a Roth IRA, back-door Roth IRA, or even a Mega-Back Door Roth IRA are all ways of reducing money paid in taxes during retirement
- Planning helps you make good financial and career decisions and prepares you for emergencies.
- Helps you enjoy your marriage life: financial issues are known to be one of the major causes of divorce. So preparing for retirement will help you to plan your finances, to sustain your marriage
- Planning can make you a good parent/grandparent: planning for your retirement will ensure you’re not a financial burden to your children and allow you to spend quality time with your grandchildren, and perhaps take them on some trips.
When Should You Plan for Retiring?
Everyone’s curious about when to plan for retirement. Research from Morning Consult reveals that only about 40% of Americans begin saving for retirement in their twenties. In their 30s, about 25% of people begin saving, and 15% in their 40s. 6% of people start saving in their 50s.
Surprisingly, neither half of the persons aged 18 to 34 nor 42% of adults aged 35 to 44 are saving at all.
When is the right time to start planning for retirement? We believe preparation for retirement should begin from the moment you obtain your first paycheck – between your 20s and your 30s.
Learning how to prepare for retirement will help you build on compound interest, and help you to take advantage of your employee benefits.
The question you should now ask is: “What do I need to do to retire comfortably? Read on to get our best tips on planning for retirement.
What Are the 7 Must-Do Steps in Retirement Planning?
Wondering how to plan a retirement? Here are our 7 recommended steps for retirement planning.
- Set your retirement goals and understand your time horizon
Your first step in retirement planning is to reflect on the kind of lifestyle you desire to have after your work life. Would you want to be on a beach in Fiji, or spend time in your home garden?
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Where would you want to stay, at home or abroad? Would you like to visit new places? Based on your family history, do you anticipate any significant health expenses? These are questions you’ll have to answer at this stage.
You’ll equally have to estimate the time you have from this moment till you retire and how to make the most out of it. This completes the first step in the retirement planning process.
- Evaluate your current revenue and your anticipated retirement spending
After setting your retirement goals, estimate how much these might cost. This estimate will depend on factors such as your retirement age, your health, and lifestyle, loans or liabilities, your retirement goals, and commitments you may have.
Inflation and longevity risk equally have to be taken into account.
You should also evaluate your current revenue, and take stock of your expenses and sources of income.
- Share thoughts with your family and your boss (if you have one):
Have an open conversation with family, colleagues, and even retirement planning agencies; get their thoughts and arrive at what can be best for you. In the multitude of counsel, there is safety.
Be open, sincere, and agree to disagree on good terms. And you’ll get some helpful advice.
- Get a retirement plan as per your age range and act upon your plans
Retirement plans let you put a portion of your paycheck into a tax-advantaged retirement savings plan, allowing your wealth to grow enormously, thus giving you peace of mind in your retired years.
There are numerous retirement plans, and depending on your age group and your job type, different retirement plans will be best for you.
Here are some common plans:
- Defined contribution plans
- IRA plans
- Solo 401(k)
- Guaranteed income annuities (GIAs)
- Traditional pension
- The Federal Thrifts Savings
- Cash balance plans
- Cash-value life insurance plans
- Non Qualified deferred compensation plans(NQDC)
Need expert guidance on how to choose a retirement plan? Connect with a top financial planning firm in Portland Oregon today.
- Grow your money by saving and investing
After choosing a financial retirement plan which lets you save some amount of money out of your earnings, now look for investment opportunities. If you’re young and have about 30 years until retirement, you can invest in some volatile and risky assets like stocks.
However, people above 50 are advised to go in for more bonds that are less volatile and can provide you with some income you can live on.
When making investments, consider downsizing current debts, and preventing new ones.
For more guidance on investment for retirement, please book a call with our investment management consultants in Portland, Oregon.
- Protect your assets with insurance and establish an estate plan
Estate planning is one of the best things you can do for your retirement. Why’s ‘estate planning’ good for you?
- It defines who will receive your assets and make decisions when you’re gone.
- Provides protection for your child or children
- And Helps minimize expenses and time delays.
Purchasing insurance for your assets is also important because it covers the gap between the present market value and the original price of the property, in case of an unexpected event such as damage or inflation.
- Review and adjust regularly
What is crucial today might not be important in a couple of years. Always review and adjust your priorities as need be. Review your portfolio, at least on an annual basis, and endeavor to have a good relationship with your financial advisor.
Connect with top experts on retirement planning in Portland.
How can Interactive Wealth Advisors help?
Conclusively, you cannot predict what might go wrong in the future, but you can prepare for it. With proper planning and preparation, you can build financial security for retirement. We’ve just helped you learn what steps should be taken in retirement planning.
As you start to think about retirement and taking your first steps to retirement, we recommend you get in touch with a professional financial planner for expert assistance.
Make Interactive Wealth Advisors your partner through your retirement journey. We help hundreds of Americans across the country plan and prepare for better lives after retirement, by building, growing, managing, and protecting their wealth – through all transitions in life.
But that’s not all! At Interactive Wealth Advisors, we also offer expert guidance on wealth planning for business owners and sudden wealth management.
Here’s what you’ll get from us:
- Guidance with creating a holistic personal financial plan.
- Professional follow-up on your financial goals
- Help with making better financial decisions.
Schedule a call with us now!