Steps for Retirement Planning
A large part of retirement planning is saving money, and while retirement may seem like a far-off event, saving should begin now. The average American aged 40-60 has less than $100,000 saved for their retirement and surveys have shown that $1.7 million is required for a comfortable retirement. So, if you want to be comfortable in the later part of your life, here are some steps you can take in preparing for retirement.
Determine How Much You Will Need. The first step to begin your retirement planning is determining how much you are going to need to save. You should take into consideration the projected increase of living expenses, how long you will likely be in retirement, and the type of lifestyle you want to lead during retirement. These are just estimates, so your true financial needs may be lower or higher.
Look into SSI Benefits. Social security checks are a form of monthly income that is directly related to your pre-retirement income. The SSI check, for most retirees, replaces about 40% of their income. On average, an SSI check is about $1,543 monthly. Some resources can give you an estimate of your potential SSI benefits. If that seems to be enough for you to live on, then you may want to adjust your savings strategy.
Start Saving Right Away. Getting started with saving as soon as possible is one of the best things to do. It does not matter how much you can contribute, just that you do contribute. If you start small, make sure you are eventually increasing the amount you are putting in.
Join Employer’s Retirement Plan. If your employer offers a retirement savings plan, like the 401(k), you should join and contribute as much as you can. Doing so could result in lower taxes and your employer may kick in a greater amount. Joining a plan in the workplace is easy to keep up with because it is set up as an automatic deduction. You will be saving consistently and without much hassle.
Leave Savings Untouched. Having a large amount put away for savings makes it easier for you to potentially want to borrow from it. However, you should never want to borrow from your retirement fund. If you did, you may potentially lose principal and interest, lose tax benefits, and be required to pay withdrawal fees. If you lose or change jobs, you should not withdraw. Instead, you should leave it invested in your old plan or move it over to your new employer’s retirement plan.
Retirement is your time to relax and be free of working life. To get the full experience, you should begin planning now.
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