Sandy was a workaholic who spent her whole life chasing the almighty dollar.
She never made time to enjoy her money, and always assumed she’d have enough for retirement. After retiring, Sandy was shocked to discover how hard it was to make ends meet. After a lifetime of working long hours, how could she have nothing to show for it?
The truth is, planning for retirement doesn’t mean working more hours, or making more money. Instead, retirement accounts are all about creating a long-term strategy, to make your money work for you. Read on to learn how to prepare for retirement, the right way.
Retirement Accounts Calculator
For starters, there’s no one-size-fits-all when it comes to retirement accounts. Instead, everyone’s retirement strategy is going to vary from one person to the next. That’s why we suggest you start by calculating how much you need to maintain your current lifestyle.
A retirement calculator will ask only about your proposed annual living expenses. Along with a few details about your retirement account plans. Once you’ve entered all of the necessary information, the calculator will produce a dollar amount. The dollar amount represents how much you’ll need to maintain your current standard of living during retirement.
If you’re not sure if you’ve included enough variables, it’s okay to play with different numbers before running the calculation for real. You can also conduct a simple online search for retirement charts. You should be able to easily can find tons of 3 or 5-year budget charts.
These charts can point you in the right direction as far as what kind of lifestyle you can expect once retired. The wide range found on these charts is mainly due to individual preferences and planning differences.
The simplest method is to base your estimates on how you’ve been spending money in the years leading up to your planned retirement date. Even though it may seem a bit rough, this is one of the best approaches.
You’ll be able to accurately calculate what kind of lifestyle you can expect during early or mid-retirement. Be sure to take into things account, such as the cost of living going up. For instance, rent prices in America have gone up 2.8% in 2021 and may continue to rise.
Planning for Social Security Benefits
Next, take into account the social security benefits you’ll be eligible for when it’s time to retire. Social security benefits vary depending on your income, work history, and what year you were born.
Depending on the exact social security benefit you’re eligible for (and how much that benefit will be worth by retirement time). It may help to adjust your budget or expenses to more accurately plan for early or mid-retirement.
How can you apply for social security benefits? It’s all about the timing. You must apply for social security benefits before reaching full retirement age. If not, you’ll have a gap in your social security record that could mean no payments at all during early or mid-retirement.
Waiting until full retirement age means waiting until your benefit is higher than it would be if you had applied at an earlier date (like 62). Before reaching full retirement age, there are a few different options.
First, you can apply for benefits as soon as possible after becoming eligible. Next, you can delay the application process if necessary. Finally, you can claim benefits and then change back to a delayed status once you’ve reached full retirement age.
Benefits of High Yield Savings Accounts
Next, another retirement planning approach is to open a high yield savings account. Unlike a traditional savings account, high yield savings accounts enable you to enjoy a much higher rate of return on your money. In some cases, they even offer rates of return that are comparable with the interest found on low-risk investments.
What determines your rate of return? Rates of return vary based on how much money you’re willing to deposit into an account and for how long. In other words, return rates are what a financial institution is willing to pay you in exchange for keeping your funds within their reach.
Deposits tend to be between $1,000-10,000 per individual account holder. The larger the amount you deposit, the more attractive it is for bankers. They’ll recognize the opportunity to turn a big profit, and who doesn’t want that?
These high yield savings retirement accounts are becoming increasingly popular. One reason is thanks to their high potential return on investment. Just remember, high yield savings accounts are best for those who are looking to save up a large amount of money for later use.
Retirement Planning With Insurance Coverages
So far, we’ve been discussing saving strategies, as well as how to access social security benefits. However, you should also review your insurance coverages, so you’ll be prepared for any type of disaster that might come your way. After all, the equity you’re building up in your home can go a long way towards funding your retirement.
If you’re enjoying your retirement, and a storm rips the roof off of your home, you’ll want to make sure you have the right coverages in place. Whether you’re looking for water damage restoration near me or roofers, take your time to find reputable contractors. Make sure the contractor’s work will be covered by your insurance company, before agreeing to repairs.
Next, let’s dive into how you should be growing your money through high and low-risk investments.
High Return vs Low Return Investments
What’s a high-risk investment? A high-risk investment carries a higher probability of loss due to unforeseen circumstances or changes in the market. When you invest your money into a high-risk investment, it’s more likely things won’t go as planned.
High return investments are risky for a few different reasons. One is that they often deal with unpredictable property markets. You also have to account for rapid currency fluctuations or sudden drops in overall perception about the value of an entire industry.
High-return investments include all real estate-related transactions. For instance, short sales or foreclosure auctions are types of high-risk opportunities. Other common high-risk investments include oil and gas drilling businesses.
Next, you have mining companies and portfolio diversification products. There are also diversification products cryptocurrency trading, and investing in risky mutual funds.
Take Advantage of Low-Risk Investments
What’s a low-risk investment? A low-risk investment carries less of an impact on your portfolio due to unforeseen circumstances or changes in the market. When you invest your money into a low-risk investment, there’s less likelihood for it not to turn out as planned.
Low-risk investments include certificates of deposit (CDs), treasury bonds, and treasury bills. Other low-risk opportunities include government bonds, or real estate mortgages (bank loans). They provide a steady stream of revenue over time.
However, low risk often means low return, so they carry much less growth potential. These products are safe bets with little prospect for major gains. Nevertheless, low-risk opportunities can be appropriate for the futures market, since they are backed by large corporations such as banks.
Balance Your Portfolio
What is a balanced portfolio? A balanced portfolio combines low-risk and high-risk investments to create a financial plan. A long-term plan, where you can expect to experience moderate growth over time (trading in cryptocurrencies counts as high-risk investing).
A credit union or bank may require you to have a certain amount of your savings placed into low-risk investments. If so, this is usually because they want to protect their clients from having too many funds tied up in products labeled as high-risk.
Instead, they suggest splitting up your entire investment portfolio which creates a more diverse product. You’ll be effectively covering all bases when it comes to the future success of your money.
A good place to begin looking for a low or high-risk investment is by searching the internet. If you don’t know of any investments that are currently considered highly risky, then finding an online broker is probably your best bet.
When doing so, it’s important to have a notepad and pen handy because you’re going to want to make notes about each product offered as well as how much money you’ll need to invest there. This will help give you a much clearer picture of exactly what you’re getting into when it comes time to make decisions on whether or not certain products are right for your portfolio.
Start Thinking Ahead
Like all good things in life, retirement is best planned for ahead of time. After all, you never want to be caught without a plan when it comes down to your finances! Remember to take advantage of multiple investment opportunities for your retirement accounts, while maintaining a balanced portfolio.
Of course, to reach your retirement goals, you’ll first need to determine what they are! Go ahead and use a retirement calculator today to see exactly how much you’ll need to save for a comfortable retirement. Are you ready for more tips like these? Check out the rest of this site!
