Retirement may seem like a distant or even unreachable goal, but it is a life event that is slowly nipping at your heels. While it should represent a reward after years of working hard, retirement can also be associated with uncertainty and more work for some. According to Careerbuilder.com as many as 54 percent of people have stated they plan to work after retirement. Let’s explore some financial planning tips so you can be among that 46 percent that can plan on living care-free during these years.
Start Saving Now
The single most important piece of advice for retirement is to start to save early. The money you save now will grow at an incredible rate when you factor in things like the average return on investment in long-term investment vehicles. If you can save money by living more frugally, then do it. Turn the pennies you save now into dollars or tens of dollars by investing it over the next 20 to 40 years. The sooner you start the better. Investopedia recently published the following comparison between two investors, Lance and Earl.
Both are 25 years old. Earl invests $1000 a year for 10 years into a mutual fund earning 15% per year and then stops. Lance decides to postpone his investing for 10 years and then contributes $3000 per year for the next 20 years.
Here are the results:
Plan to Reinvest
Remember Earl only invested $10,000 of earned income the rest came from allowing the money to compound. When planning for retirement, remember that your goal resides in the realm of long-term results and that comes from compounding. You want to reinvest every bit of profit you make. Compounding is like creating little money machines. The last thing you want to do is to spend those gains. Using an IRA or other retirement vehicle lessens the temptation to stop the process because of the penalties involved with early withdrawal.
Take Advantage of IRAs
Individual retirement accounts (IRAs) give you numerous tax advantages. They allow you to deposit up to $8,500 each year before the age of 50, and even more once you are 50 years old. The best part about IRAs is that you can configure them so that your IRA investment money is automatically withdrawn from your checking account each month. This can allow you to save a sizable amount without ever needing to actively do anything.
Consider What You Will Need
One of the main reasons people fail to adequately save for retirement, stems from failure to plan for your future needs. Examples of things to consider include:
- Procuring housing, which should include rent, mortgage payments, taxes and repairs.
- Paying for groceries and entertainment.
- Affording medical care.
- Further investments to compensate for heightened living costs and other needs.
You have more options available to you than you might imagine. Don’t be afraid to downsize as you get older. It will save you money and reduce your maintenance headaches. You might also consider a retirement living community, like Sunshine Retirement Living, which can provide a surprisingly cost-effective approach to housing and other basic needs, without the headaches of home ownership. It also has the bonus of having socialization with other retirees at your doorstep. Plus because it includes Rent, Property insurance, Maintenance, Security, Cable, Water, Sewer, Gas & Electric, Lawn Care, Pest Control, Trash, House Keeping, 3 meals a day, Transportation, and more all in one for $1,595/month you can know exactly what your monthly expenses will be.
Learn about Your Current Plans
If you have a retirement plan set in place by your employer, learn all you can about it. This will help you determine if it will be adequate in the future for everything you need to pay for. If your current plans are inadequate, then consider cashing out early, and investing in other plans. Be careful when you do this, as the added benefits your pension plan may provide, which could include healthcare, may be worth keeping.
Planning for your future retirement requires a dedicated effort that starts today. You must begin saving, planning, and researching your options to ensure you will be able to make the most out of your later years.