Stages of Retirement Planning
Date: July 21, 2016
Most people put off thinking about retirement until their older, but they shouldn’t. In 2015, the AARP reported that you should aim to have saved $1 million to $1.5 million, or at least 10 to 12 times your current income, in order to enjoy your golden years. Common sense tells you that the earlier you start saving, the sooner you'll have your ideal nest egg. Here are some to tips to help break down retirement planning into stages.
Hit the Ground Running
The initial period of planning for retirement essentially begins when you first enter the workforce and lasts until you're in your late 30s. If possible, you should save for retirement throughout your career. Begin investing as much money as possible in your future as early as possible.
In 2015, CNN Money reported that people can no longer rely solely on Social Security or their company’s pension plan. Beyond your employer's retirement programs, explore other investment vehicles such as an IRA or an annuity. You should be saving as much as possible, but also investing to grow what you earn.
Pay Off Debts
Midlife is a time when you likely have a solid income and a sense of where you are in your career, but you also might have accrued quite a bit of debt. According to U.S. News & World Report, this is the time to start aggressively paying off that debt so it doesn't hurt you later in life. If you have a family at this point or own property, you probably have several major financial obligations. Learn about budgeting and come up with a plan to pay off your debts while continuing to save and invest in your future.
Preparing for Expenses in Retirement
The pre-retirement stage covers the 10 to 15 years leading up to actual retirement. At this point, you've been working for years and hopefully accumulated some savings. It's important to understand where your money is: Do you have a 401(k) or 403(b) plan through your employer? Do you contribute to an IRA or a myRA plan? Do you own a home?
Knowing where your money is helps you focus on retirement. Create a budget by listing what expenses you expect to have each month in retirement. Consider downsizing or finding alternative ways to earn some income in retirement — it's better to plan for this before you actually retire.
Planning Doesn't End When Retirement Begins
When you officially enter retirement, you should continue to plan for your future. Continue to budget, regularly check your various savings and investment accounts and adjust spending accordingly. With just a little bit of continued focus, you can maintain a comfortable retirement.
If you're just starting out in the workforce, great; now is a good time to get a jump-start on planning your future. But if you're a little older, have no fear; there are steps you can take to catch up on saving for retirement. By breaking retirement planning down into phases and by starting to save and invest as early as possible, you can remove stress in later life and enjoy your golden years.