Preparing for retirement needs to be planned carefully and started early. Sound financial planning will enable you to enter your retirement years with much less stress and you will be able to enjoy it more. Here are five secrets about retirement planning you need to know.
Start Young and Save as Much as Possible
When it comes to saving money for retirement, it will really pay well if you can put away a lot of money while you are still young. This is because of the power of interest, which will multiply your money several times. The longer it has to build interest the more money you will end up with for retirement. Make saving money a priority and don’t stop putting it away for your future. Also, make it a point to never borrow this money at any time.
Determine Your Retirement Savings Goals
Meeting your needs for a secure retirement means that you need to have some kind of idea of just how much money you will need at retirement time. In order to calculate it more accurately, you need to decide when you want to retire, add in costs for such things as medical and dental care, possible long-term care, cost of living increases, and other expenses, and estimate about 70 percent per year of your current income. More money will need to be added for special things you want to do during retirement, such as money for traveling, etc.
A 401(k) Is Probably Your Best Financial Planning Tool
When you want something that is easy to manage and will still give you the cash you need to retire on, a 401(k) is hard to beat. When you consider that many employers will still match contributions, and that you can deduct it from your income, as well as getting tax-deferment on your growth, it has to be a good deal, says Money.CNN.com. You want to take full advantage of this by maxing out your own contributions each year, too.
Reduce Your Debt Quickly
In order to have a financially safe future in your retirement, you need to get rid of your debt as fast as possible, says Michele Lerner at FoxBusiness.com. Having debt that has high interest – particularly credit card debt – is only going to prevent you from being able to put the money away you need for your retirement. If you have student loan debt, it may be possible to shop around and get a lower interest rate.
Use Different Tools to Invest Your Savings
When it comes to the money you are saving for retirement, it is never a good idea to put all your eggs in one basket. The Department of Labor (DOL) recommends that you diversify your savings and create a balanced portfolio based on your age, risk level, and how much you have to invest. As you age, your risk level and type of investment should change in order to give you a financially secure retirement. Meeting these changes, says Investopedia.com, requires that you occasionally reassess your portfolio and make adjustments as needed.
Preparing for retirement should never be just an afterthought. It requires careful financial planning while young and commitment to invest in your own future in all your years leading up to it.