Did you know it’s recommended you have at least twice your annual salary saved for retirement by your 30s? That means if you’re making $45,000 a year, you should have at least $90,000 saved.
The reality is, however, that a lot of people don’t even have $45,000 saved by that age.
Future planning can seem like a daunting process to begin. In fact, it can almost seem far off, impossible, and maybe even unnecessary. The truth is, it isn’t.
So, what exactly goes into retirement planning? How can you ensure the brightest future possible for yourself and even your family?
Read on to learn seven of the best ways to prepare for retirement.
1. Establish the Proper Mindset
The best step you can take towards financial planning is establishing the proper mindset. To do this, commit to facing your financial reality.
Start by examining your monthly expenses and comparing them with your monthly income. This alone can give you great insight into things that might need to change, or it can let you know how much you’re able to regularly put away.
2. Find Three Things to Look Forward to in Retirement
If you can create a list of three (or more) things you can look forward to in retirement. Not only will this help you have something to look forward to, but it will also give you the motivation you need to see things play out.
If you set up a positive vision for your future, then taking those next few steps are going to be easier to make happen.
3. Determine Retirement Spending Needs
There’s no possible way to know how long you’re going to live after you retire. While the average person retires at 66 and lives until they’re 79, the chances of living longer than that are pretty high.
So, the best thing you can do is determine how much you may need on a monthly basis and then move from there. Often, people assume they’ll only need 70 to 80 percent of what they need to live now, but as the cost of living increases, it’s smart to push that number closer to 100 percent.
When you first retire, you may want to check bucket list goals off your list, so it’s smart to account for those trips and any other experiences as well.
4. Set Up an Account That Works for You
After you’ve determined your spending needs, it’s time to open a retirement account that works for you. What kind of account you open is going to depend upon your career and whether you’re self-employed or not.
For most W2 employees, your employer has probably set you up with a 401(K). This type of plan comes with a variety of variants, but the base is the same.
A 401(K) provides you with a dedicated place to put retirement funds. A percentage of each paycheck is taken and placed into this account, but how much you contribute is up to you.
With some plans, the money is tax-free and your employers may even meet your contributions. If either of those is included in your plan, it’s recommended that you contribute as much as you can.
Self-Employed Retirement Accounts
When you’re self-employed, your options for a retirement account can feel limitless. You have access to a 401(K) as well, but you can also access a simple employee pension, simple IRA plan, or even a Roth IRA.
You can even choose to combine one or more of these plans to suit your needs. What you decide upon, however, is going to be based on you and your retirement plans.
Whether you’re self-employed or not, there are a lot of options for retirement accounts. If you find yourself struggling to make a decision, you can meet with a professional to discuss your options.
5. Annuities
Learning how annuities work is going to set you up for the long run.
In short, an annuity is a long-term investment or contract that you set up with an insurance company. Once you retire, you get regular payments from that insurance company. How much you receive and how often you receive it is going to depend on the type of annuity you have, but it’s still a stable supplement to your retirement savings.
6. Stay On Top of Estate Planning
Another thing to set up in advance is estate planning, along with life insurance.
Having both of these things taken care of is going to ensure that your assets are distributed exactly the way you wish for them to be, and it’s also going to ensure that your loved ones experience no financial hardship in the wake of your death.
You should also take tax planning into account if you plan on leaving money for family members or a certain charity. The best thing to do here is to consult a professional to figure out which plan would best suit you, your family, and your needs.
7. Know That Retirement Isn’t Only About Money
You should also expect that, though retirement is certainly as good as many would lead you to believe, there are also many that struggle with the transition.
Retirement brings with it a lot more time and freedom, but people don’t always know what to do with their newfound time. One thing is for sure, though, you shouldn’t have to deal with financial stress after you’ve retired.
Start Future Planning Today!
When you begin planning for retirement as early as possible, you set yourself up for success. Not only are you providing yourself with financial security and stability for the future, but you’re also ensuring that your partner and family are taken care of in the long term.
So, what are you waiting for? Start future planning today!
If you’re interested in more on the latest in finances, health, and home, check out the rest of our blog.
