Retirement is a goal we all have, but it’s not always so easy to plan for. Planning for retirement involves careful savings, thoughtful goals, and potential changes to your current lifestyle. It means sacrificing now in order to gain more later in life, which can be difficult for many Americans. Maybe that’s why only 55% of Baby Boomers reported having money saved for retirement.
But just because retirement seems overwhelming doesn’t mean you should put off planning for it. You should be saving now. Here are some ways to make sure you’ll be ready when the time comes.
Make Retirement Plans
What does retirement mean to you? Does it mean relaxing on an island for the rest of your life? Maybe it means spending time with family, while still being able to cover your personal expenses. Whatever your future goals may be, write them down and be specific. The more descriptive the better, and the more tangible your retirement will become. If your retirement goals are more luxurious than your current living standards, it’s a good indication that you’ll need to do a little extra planning to get prepared.
It’s important that you begin by setting realistic retirement goals. This could mean something different for everyone, so make sure you’re fully aware of your current financial circumstances. If you don’t have a billion dollars saved away for retirement, that’s okay. Just don’t set goals to live like a billionaire. Start with basic goals, like continuing any payments for cars, mortgages, and living expenses. Then, move on to planning for other, more fun expenses during retirement.
How can you make your future goals a reality?
Now that you have a better idea of what you want in your future, planning for retirement means coming up with a way to meet those expectations and expenses. These days, it’s hard to rely on any retirement plan that’s not your own savings. So it’s important to take advantage of savings plans such as 401(k)s and IRAs. As a rule of thumb, most people will need about 70% of their annual pre-retirement income to live comfortably. But if your definition of retirement involves expenses beyond those you have now — like traveling — you’ll likely need much more.
Take stock of your current assets and when you want to retire, then calculate how much you’ll need to put away every month. Most financial experts say to put between 8% and 12% of your salary toward retirement, but the amount will depend on your goals and when you start saving.
When should you start saving?
You’re never too young or too old to start saving for retirement. The best time to save for retirement is now. Start today by looking into savings plan options. If your employer doesn’t sponsor a 401(k) plan, speak with a financial adviser at your bank about opening a certificate of deposit (CD) or individual retirement account (IRA). These typically offer much better rates than traditional savings accounts and are relatively safe investment options.
Are you ready for retirement?
Retirement planning may not be fun, but it will be worth the reward at the end of the process. Begin by setting realistic goals, determine the best way to meet those goals based on your current financial situation, and start saving.