It’s recommended that you think about your retirement plan now so that you don’t have to depend on your children in your old age and you can still have a lifestyle that you live when you were earning. The earlier, the better.
Achieving a comfortable retirement nowadays requires a well-thought approach to retirement planning. With life style changing now, you need to fend for yourselves. Even the old parents are not spared. Due to current economic situations and rising inflation, your income may not hold the family expenses. Therefore, it’s normal that a family may have to have two income earners. Earlier generation did not worry about their retirement that much, as they were sure their children would take care of them in their old age. Well you can see the state of old people now. Therefore, it’s recommended that you think about your retirement plan now so that you don’t have to depend on your children in your old age and you can still have a lifestyle that you live when you were earning.
Here are some tips for a good retirement planning:
1. Plan your savings
Basic principle of savings: save as much as you can as early as you can. The sooner you start saving, the more time your money has to grow. Do it now, it’s better late than never. The gains from savings each year build on the prior year’s — that’s the power of compounding, and the best way to accumulate wealth.
2. Understand your realistic needs and set your goal
When you are planning for your retirement, you need to think about your retirement expenses based on your needs, not rules of thumb. You have to be honest to yourself about how your lifestyle will be after retirement and how much it will cost. Then calculate how much you must save to supplement Social Security and other sources of retirement income.
3. 401(k) : easy way for retirement savings
Consider contributing money to a 401(k). It will give you an immediate tax deduction, tax-deferred growth on your savings, and usually a matching contribution from your company.
4. IRAs and tax breaks
IRAs offer huge tax breaks. There are two types of tax breaks: 1) a traditional IRA offers tax-deferred growth, meaning you pay taxes on your investment gains only when you make withdrawals, and, if you qualify, your contributions may be deductible; and 2) a Roth IRA, by contrast, doesn’t allow for deductible contributions but offers tax-free growth, meaning you owe no tax when you make withdrawals.
5. Plan your money investments
It’s important to plan how you should divide your portfolios between stocks and bonds, which eventually will have a big impact on your long-term returns.
6. Select good long-term investments
Most people agree that stocks are best for long-term growth. Stocks have the best chance of achieving high returns over long periods. A healthy investment will help ensure that your savings grows faster than inflation, increasing the purchasing power of your nest egg. However, you will need professional advice for your stock investments. Just be reminded that there are always some risks involved in all kinds of money investments.
7. Bond investments
Most financial analysts warn not to move too heavily into bonds, even in retirement. Many retirees stash most of their portfolio in bonds for the income. Unfortunately, over 10 to 15 years, inflation easily can reduce the purchasing power of bonds’ interest payments.
8. Making tax-efficient withdrawals
Once you’re retired, your assets can last several more years if you draw on money from taxable accounts first and let tax-advantaged accounts compound for as long as possible. Simple as it is!
9. Think about finding something to do in retirement
Working part-time in retirement can be a good option. Working keeps you socially engaged and reduces the amount of money you must withdraw annually once you retire.
10. Find out about your Social Security benefits
Social Security pays benefits that are on average equal to about 40 percent of what you earned before retirement. You should receive a Social Security Statement each year that gives you an estimate of how much your benefit will be and when you can receive it.
The following Web sites can also be helpful:
Published in: Personal Finance