It’s never too early to start preparing for retirement. The planning process can get quite overwhelming and it requires discipline, time and effort. Taking care of your financial wellness today will ensure that your retirement goals are manageable while you get to maintain the lifestyle you hope to enjoy as you age. To have that smooth transition from career life to retirement, here is what you need to do.
1. A retirement master plan
Are you saving enough to retire comfortably? Or are you saving just for the sake of it? Are you even saving at all? Sometimes the job title that comes with “permanent and pensionable” tag can make you a bit too comfortable. However, you need to ask yourself, will the pension be enough to maintain the lifestyle you want? The best way to start planning for retirement is to determine what you will need to retire. Estimate what you will have at hand by evaluating your current income sources and retirement revenues and calculate what you need to annually put aside to meet your goal. Put this plan in writing. Your master plan will shed light into your overall financial status and it is directly linked to the retirement preparedness. One advantage of having a plan is to keep you on track and avoid emotional decisions that can easily take your focus away. If you feel like you lack the financial confidence to make an informed decision about your initial retirement investment options, run a basic retirement calculation to get a solid estimate of how much you need to save. If you can save 10 per cent of your income, that’s a good start. Make a point of making 1-2 per cent increments annually to bring you closer to your goal.
2. Implement your plan
The path to financial independence needs prompt and well-thought out plan implementation. The sooner you take action, the better. Re-assess how you manage your money and adopt a holistic approach to upgrading your overall financial health. Identify means to save more when you discover that your current savings plan is not realistic to your ambitions. Separate “wants” and “needs”. Cut down your expenditure by eliminating debt and unnecessary purchasing. Make your money work for you by investing more into well researched income generating ventures to multiply your earnings. Track your progress regularly to assess your ability to stay on course. Take into consideration that your plan should be dynamic enough to consider life changing events in your life like marriage, divorce, getting laid off, job promotion, educational funding etc. Adjust your plan when your situation necessitates it and keep updating your spouse, family, and financial advisors. If you are distraught that your earnings may not be enough to save handsomely, consider ways to increase your income. Start a business, get a side hustle and use the extra earnings to invest for the future.
3. Increase your knowledge
Learn more about retirement savings. Invest in your company retirement plan since contribution is made pre-tax and automatically reduces your taxable income. Research about life insurance coverage and the right type of insurance to fit your needs and those of your loved ones. Once you invest in your preferred insurance, review your policies regularly, at least once a year, so that you can factor in major life events that may change your situation and get a sense of the insurer’s commitment to uphold ethics.
A major concern that most of us have is health insurance costs as one gets closer to retirement. As a precaution, include healthcare costs in the master plan. A long hospital stay or a long term disability can have a long lasting negative impact on your income. It is also wise to insure your assets such as your home and other real estate properties.
Dig deep and involve the services of a financial advisor who should give you a diversified portfolio that helps to reduce the risk of you losing all your retirement goodies and the right investment considering your age, risk tolerance and financial goals. You also need to make the most out of tax-advantaged accounts as you save up. Learn to eliminate extra fees and charges, shop around for better deals in banking services and other money lending institutions.