Whether you are 40 years from retirement or it is just five years away, there are things you can do to help you plan for your golden years.
In most cases, the earlier you start saving for retirement, the better, but a study in 2019 showed that 48% of adults are not saving for retirement at all. So, what do you need to get started?
There are a few questions to ask yourself:
- When do I plan to retire?
- How much money will I need to live during retirement?
- Who can help me plan for my retirement?
Answering these questions can get you started on the right path, and will give you pertinent information to share with any professional you choose to work with in your planning.
When Do You Plan to Retire?
In 2019, the average age of retirement was 66, according to a Gallup poll. Where do you fall on the retirement spectrum? Some people want to retire as soon as possible, even in their 50s. Others want to work as long as possible, and can remain in the workforce well into their 80s.
When you plan to retire and what age you are now are essential parts of the puzzle when planning.
For example, retirement investments have various levels of risk. Someone who is decades away from retirement may take more risks with investments because there is an opportunity to make up for losses over time. When closer to retirement age, some people might choose to take less risk with their investments so they have a solid estimate of what they will have in savings when they retire in a few years.
While the best time for most people to start saving for retirement is as soon as they earn a paycheck, there are always retirement options for all ages.
How Much Money Will You Need in Retirement?
How much money you will need for retirement depends on many factors like the lifestyle you want to have, where you will live, and what you expect things like medical care and housing to cost.
Here are a few things to consider when estimating how much money you might need in retirement:
If you want to live a more luxurious lifestyle than when you were working, like traveling or living in a more expensive area, you will need to save more than someone who wants to live more frugally.
Inflation rates vary each year, but it is something you should consider when estimating your cost of living in retirement. For example, the inflation rate in 2018 was 2.44%, while in 2015 they estimated it at just .12%.
If you have debts that will need to be paid off during retirement, you should consider this in your retirement planning.
Do you want to plan to have money to leave for members of your family when you die? Will you need money to pay for an adult child’s education? These factors will impact your finances in retirement.
While there is not an exact science to estimating how much money you will need in retirement, professionals have different ideas of what is considered sufficient. For example, AARP estimates that individuals will need about 80% of their pre-retirement income to live comfortably.
A study showed that 2 in 3 adults don’t get professional retirement advice when they are planning for retirement. Working with a financial professional is essential when considering all of the factors that can impact your financial future.
Not only can a professional help you estimate how much money you will need in retirement, they can also help you evaluate investments and their risks and make other important financial decisions that will impact your retirement.
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