We all want to retire comfortably and to accomplish that, you need to take some thought into retirement planning. Most of the time, your planning will involve how you can build up the funds that you will need to live the type of lifestyle you prefer.
When you retire, your physical body will no longer able to work as it used to. In can even be expected that your health care expenses will be more costly by then. That means you have to stop working and give yourself the rest of your life to relax. That also means whatever expenses you have to pay for during that time will have to be saved up today.
Retirement mistakes you should not make
In retirement planning, we are sometimes too focused on computing how much we need to retire that we lose sight of other things. In some cases, we start to make mistakes that we never really thought are important as we plan for our future life.
There are a couple of things that you need to be cautious about when you are making your plans about your retirement years.
Don’t forget about the D word. In most cases, people are scared to think of death but we all know that we are getting there. We don’t know when and where but the fact remains that it will happen sometime. While we do not want to anticipate it, you need to prepare for it financially. It will definitely not be for your benefit but for those that you will leave behind.It is important that you do not assume that you will live forever. Having said that, you need to consider this factor when you are investing your money. Also, make sure you have a life insurance in place. Even if you have a concrete plan to retire with millions, one accident can leave your family with nothing if you do not get your documents in order.
Thinking you can work until you drop. Sad to say, there are people who are so sure of themselves that they never realize how frail they could be in the future. We all think that we are invincible but as we age, our physical body grow weaker too. You have to consider the fact that there may come a time that you are no longer able to work. Even if your mind remains as sharp as before, an illness or an accident can seriously compromise your ability to earn. If you are not prepared for that, what will you use to pay off your financial obligations? Your basic needs and health care are one thing but what if you still have debt payments? How will you get the money to support all of these contributions?
Not maximizing your 401(k). If your employer is willing to match your contributions, you need to ensure that you are making high deposits into your retirement plan. If you are getting free money, why not maximize the amount that you can get? Not only that, this type of fund grows without taxes ever touching it. The only time it will be taxed is when you withdraw it but if it stays there, it will be safe.
Tips when planning your retirement
Retirement planning is not as tedious as you think but it is a lengthy plan to implement – especially when you started out young. There is really nothing wrong about saving up for your future and you will never be at a disadvantage if you do so.
It is important that you understand the process of retirement planning so you can maximize the funds that you will have to save. Here are some tips that we have for you as you create your plan.
Start with your target. You need to determine the type of lifestyle that you want to have in retirement. This simply means knowing how much you will need to spend on a monthly basis when you finally retire. It is important that you become realistic about the figure too. Know where you want to retire, what hobbies you want to pursue, etc.
Research on the insurance and other benefits that you can get in retirement. Benefits.gov can help you identify the financial assistance that you will be qualified to have when you enter into the retirement phase.
Calculate how much you need to put aside every month to reach your target. This is the part that scares a lot of people. There are online tools that you can use so you should not be scared of the computations. They are not as complicated as you think. Money.CNN.com has a retirement calculator that can help you compute how much money you have to contribute so you can arrive at the amount that you need to survive your retirement.
Pay off your debts. With the limited resources that you will have in retirement, do you really want to share that with your creditors? Probably not. This is why you need to pay off your debts even as you save up for your retirement. Remember that the sacrifices you make today will ensure that your future self will have a better lifestyle. Between your younger and older self, you know which one is best suited to make the necessary sacrifice.
Here is a video that discusses how you can calculate the amount of money that you need to put aside considering the compound interest on your retirement savings. You will see the different factors that you need to determine first before you can arrive at the number that you will target. These are important so you can live the lifestyle that you want to have when you retire.