7 Tips to Help You Create the Best Retirement Plan

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Are you looking forward to the day when work is now just an option and you have now accomplished financial freedom? Even if you aren’t there and heading toward retirement just yet, it’s best to start planning for it as early as now. Life after retirement may be challenging if you don’t have a steady income to depend on, having you regret the past when you were living your best times without thinking about the future. 

By setting aside some money for your future, you can live a comfier life during your senior years. This is why planning for retirement is beneficial, allowing you to retain independence and live your life today and tomorrow. You don’t need to depend on anyone for your financial needs and your future kin will have fewer financial obligations. 

The question is: Where can you start? Here are the 7 tips that can help you begin creating your optimum retirement plan:

1. What is your current situation?

No one would admit if they are ill-prepared for retirement. But it’s best to have an honest assessment of your current financial situation to create a plan that addresses shortfalls accordingly. 

You can start doing this by counting how much you’ve accumulated to earmark for retirement. This should include the balances in your individual retirement accounts, or IRAs, along with your workplace’s retirement plans, like the 401(k) and 403(b). Look into the taxable amounts if you plan to use them for retirement, but do not include money saved for emergencies or other large investments.

2. What are your sources of income?

Your current retirement savings would provide a good share of monthly income after retirement, though this might not be the only source. You might have additional income coming from areas other than savings, so you should consider that as well.

Many employees would qualify for Social Security benefits, though this depends on various factors, including your career earnings, work history, and how old you are when availing the benefits.

If you are a worker without retirement savings currently, this might be the only retirement asset you have. You may check what monthly income to expect after retirement from the Social Security website, which offers a retirement benefit estimator.

For those who have a pension plan, then you should add your monthly income from that asset and also tally up the income you receive from a part-time job you take after retiring.

3. What are your retirement goals?

Your retirement goals are an important factor to consider when retirement planning. If you are planning to downsize to smaller properties and have a quiet and modest lifestyle after work, you’ll have different financial needs compared to one who would like to travel a lot and/or live lavishly.

Develop a monthly budget so you can estimate the typical expenses after retirement, including your housing, food, leisure activities, along with health and medical expenses, insurance, and the like.

4. Set your target retirement age

One can retire at as young as 45 if he is financially prepared and ready to exit their careers, or as old as 70 if they aren’t ready yet. As life expectancies grow, those in good health should perform retirement planning estimates through assuming they’ll have to fund retirements that would last for at least three decades. 

You shouldn’t only evaluate your spending habits after retiring but how many years it would last. Retirements that would last for 40 years would look different compared to those that would last less than that. While people want to retire early, you’ll need to set a reasonable retirement date to ensure you have enough financial support for the years to come. 

5. Look into the shortfalls

Once you’ve compiled all the numbers, you can now answer one crucial question: Will your accumulated retirement assets be more than enough your anticipated amount required to fund your retirement life completely? 

If yes, then it’s crucial to continue funding those retirement accounts to stay on track. If not, then figure out how you can close that gap.

If you are behind schedule, you have to find out what you can do to add to your savings accounts and other assets. This means cutting back on some unnecessary spending. But before that, identify how much you need to close your shortfall and change what you can, along with how much is contributed to your retirement accounts. 

Now is also the time to begin cutting off your debt entirely. This will make a huge difference to your monthly expenses and overall budget.

6. What are your risk tolerances?

Risk tolerances differ by age. As you are reaching retirement age, your portfolio allocations should be more conservative so you can preserve the accumulated savings. Retirement portfolios should be focused on quality and dividend-paying stocks, along with investment-grade bonds so you continue producing conservative income.

7. Seek professional help

Not everyone is skilled in financial management right off the bat. That’s why it’s best that you consult a financial advisor or planner, who can give you professional overseeing. 

With professional software like Financial Mappers, you can ensure that your retirement portfolio is will maintained. You can find financial planners charging about 1% annually of the total assets to be managed. Choose planners who charge this way over those who earn commissions based on what products they offer and sell. 

Wrapping It Up

If you don’t have much saved for your retirement, start thinking of this article as a sign to turn things around and get moving. Take the action, especially if you are 10 years away from retiring! By doing so, you will be focusing on relaxing and having the time of your life without having to work or worry about finances as you reach your senior stage. 

Hopefully, this article gave insight on what to do as you prepare for your retirement, regardless of how far along it is. Begin retirement planning now with these tips in mind! Good luck and continue working smart.

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