How do you envision your perfect retirement? Sunbathing on the beach? Traveling the world? Chasing the grandkids around the backyard?
No matter what your ideal retirement looks like, you’re going to need retirement money to bring it to life. To get that money, there are a few steps you need to take now.
Because without proper planning, prioritizing, and investing, you might find that you either can’t afford to retire or that you have to push your retirement back once you reach retirement age.
If you’re feeling a little lost in your retirement planning, you’ve come to the right place. Read on to learn everything you need to know about how to build and manage your retirement money.
When Do You Want to Retire?
The first step is to set a target retirement age. This number might change over the years, and that’s okay. You’re just trying to get a rough idea so that you can plan accordingly.
In the United States, the retirement age is considered between 62 and 70 years old. Unfortunately, the truth for most people is that the earlier you retire, the fewer benefits you receive. There are exceptions to this rule, but generally, you can expect to sacrifice a portion of your Social Security benefits if you retire before the age of 70.
Keep this in mind as you plan. People can and do retire as early as 50 or even younger, and you can too! You simply have to not rely on Social Security to do it.
What Age Should You Start Planning?
In order to reach your retirement goals and build a strong enough financial cushion to allow yourself to live stress-free in regard to your finances, you need to start planning as early as possible.
If you haven’t yet taken any steps toward retirement, the answer is to start planning now.
The best time to start your retirement planning is in your 20s, as this gives you maximum time to grow your funds. That said, this doesn’t mean that all hope is lost if your 20s are behind you. It’s never too late to start planning, either!
By investing your money strategically, you might be surprised how quickly your nest egg grows.
How Much Retirement Money Will You Need?
When you have an approximate age in mind that you’d like to retire, it’s time to move on to your funds. There’s no one-size-fits-all sum when it comes to retirement money. The right amount can differ drastically from person to person.
Now, even with an accurate family history, it’s difficult to account for things like lifespan. You might live to be 75, you might live to be 105!
Instead of trying to guess the total number of years, focus on an individual year. The key is to know yourself, including your interests and your spending habits.
Look at your current yearly income and expenses and think about how those figures will change in retirement. Will you make and spend more or less?
If you want to see the world in retirement, you might spend a little more than you do now. On the other hand, if you plan to spend the majority of your time at home with family, you’ll likely spend less.
In addition, think about the help you’ll have in retirement. The amount you need to have in savings will be less if you have a pension plan or SSI benefits from which to draw income.
Choose a Retirement Plan
To plan your retirement effectively, you need not only the amount you want to save but also how you’re going to save it. After all, an important part of setting goals you’ll actually reach is to ensure they’re specific and measurable.
If your employer offers a 401(k) or similar retirement plan, take advantage of it. Those who don’t have this luxury will need to start with opening their own retirement account.
Again, there’s no one retirement plan that suits everyone. The best retirement plan for you will depend on your goals and circumstances. However, it’s wise to look for one that provides tax advantages and savings incentives.
Look for Investment Opportunities
When you open a retirement account, you’ll gain access to a wide variety of investment opportunities including stocks, bonds, and mutual funds. For the best results, it’s a good idea to avoid putting all your eggs in one basket. In other words, diversify your funds as much as possible.
All investments are a gamble, but some are riskier than others. The investments you choose will depend on how long you have until you need your retirement money and how comfortable you are risking your funds.
Ideally, you’ll invest aggressively when you’re young. Your funds might go up and down over time, but that’s not a problem when you still have decades to save. When you get closer to retirement age, you’ll scale back and make more conservative investments.
Start Planning Your Dream Retirement Today
You deserve to spend your retirement relaxing, adventuring, or enjoying time with your family, not worrying about money. If you want to get the most out of your golden years, it’s never too early to start planning.
By taking steps now to plan, prioritize, and ensure that you have plenty of retirement money in the future, you’ll be able to spend your retirement exactly how you want to.
If you’re interested in learning more about laying the groundwork for your future self, take a look at our blog. We have all the tips and ideas you need to help you master financial planning.
