Is your retirement goal realistic?
Planning for retirement is one of the longest and probably complex financial goals you will ever embark on. This is the reason why you need to start preparing for it as early as you can. If possible, from your first paycheck. The challenge, however, is that the need is so far into the future that people do not prioritize it.
It is not easy to set aside funds you will need decades later. This is especially more challenging when college graduates need to overcome mountains of student loan debt. What is happening is that their lenders already have a lien on their first paycheck they have yet to receive. And life is just starting out.
Your retirement goal might also take the backseat at the moment considering the health crisis going on. The whole world has been affected with the COVID19 that the health industry was operating over its limit. Many people got infected as the virus spread from one state to the other. This, in turn, rippled out to businesses and other companies as they try to pivot and adjust rapidly to keep operations running.
It is important to think about retirement planning. CNBC explains that savings for retirement normally comes from Social Security, pension, and savings. Understanding where your retirement fund will come from can help you set your priorities early on. The earlier you plan for retirement, the more secured you can be in the future.
5 Tips to Achieve your Retirement Goal
Now that you understand the importance of planning for your retirement, here are a few tips to help you reach that goal.
Set your Retirement Age
The Center for Retirement Research at Boston College shared that the average retirement age for men is at 64 years old and 62 years old for women. This is the average age of people who choose to retire. But you have to understand that this is just an estimate and that retirement age depends entirely on you.
You will be the one to define this date based on your plans and how you worked towards that goal. It is crucial to know that your plans come before your desired date. This is because you need a concrete plan of what you want to do in retirement first. This will help shape your journey to saving for that goal.
Define your Required Retirement Portfolio
It is important that you have a well-defined retirement portfolio you will tap into when you retire. This portfolio needs to be as diverse as possible. If you have heard the saying not to put all your eggs in one single basket, this is the perfect time to apply this learning. You need to consider not only your Social Security but look at other sources of funds in retirement as well. These will help you reach your desired retirement goal when the time comes.
You can have a 401k savings from your employer, IRA accounts you can tap into, and even investment savings that grows over time. The important thing is to diversify your portfolio and check them at regular intervals. More than ensuring you stay on track, regularly checking investment accounts also help prevent theft. There are hackers who target retirement accounts specifically. This is because people do not check on them as often as other types of accounts.
To help you achieve your retirement goal, you need to save money regularly. However, this is easier said than done. You need to have the willpower to start but you need to create a habit to sustain it. This means that you might be able to start saving for your retirement in the first few months of a new job.
The idea is to sustain this over a long period of time which will help create that habit. To make it a lot easier, you can begin with a minimal amount. This will help you sustain the act of saving over a long period of time. Once you get used to it, you can slowly increase the amount as you go along.
Create an Investment Plan to increase savings
It is not easy to look into investments when planning for your retirement. The basic principle is to invest money and make it grow over time. But there are costs and fees you might encounter along the way. You need to keep these expenses in mind when choosing the investment you will tap into to grow your money.
That being said, making use of investment is a passive way of saving for your golden years. There are also some investments which require minimal work like stocks and other types of funds. You need to check on them from time to time but they grow over time on their own. Of course, you need to understand the mechanics but you can invest and just watch your money grow.
You still need to remember that there will be risks involved. There will be times when your investments could take a dive depending on how the market is doing. But the idea with stock investments is to look at the long term gain. The market regularly shifts up and down but you need to focus on the overall picture.
Review and Realign
To help you reach your retirement target, you have to put a system in place where you can monitor your savings regularly. It does not have to be done everyday but regular check-ups on your investments could be done every month. This depends on where your money is or if someone else is managing it for your.
The reason for this is that reviewing how your money grows can give you the chance to realign. This is especially important when you are nearing retirement and need to manage investment risks. As you get older and your money bigger, you might want to consider realigning to safer investment products. This helps you ensure that the money you grew over the years will be intact.
Ideal Retirement Goal
At this point, you would have a target you are aiming for in retirement. But it would help to look over these goals you could aim for as well when you retire.
This is often overlooked when planning for retirement simply because you are focused on your savings. But on the other end of your finances in retirement are your debt payments as well. It does not matter if you were able to save a lot if most of that will only go to debt payments. It can be anything from mortgage payments to credit card statements and even payday loans if you have any.
That being said, it is best to try and eliminate debt payments as much as you can in retirement. Pay off the house before you retire so your focus will only be taxes and insurance. You can even consider moving into a smaller house in retirement especially if you are an empty nester. Aim to pay off big debt obligations before retirement. This will help preserve your savings and you get to use them for actual needs.
Peace of Mind
Stress is manageable and if you succeed with this in retirement, you get peace of mind. This helps you enjoy your journey more. You get a different perspective on retirement when you have peace of mind. It makes life a lot more fun and enjoyable as it should be. Retirement is a time for yourself and you need to enjoy it.
You need to have a retirement goal so you have a target to aim for while saving for your golden years. Otherwise, you run the risk of trying to chase a lot of things that will lead you nowhere. Focus and consistency can help you reach your goals.