Retirement Planning: You’ve Got To Start Sometime
When you are in your 20’s, “retirement planning” seems like a far-off notion, something you don’t have to consider for years. It seems like that something that will just happen. But that way of thinking is a trap, not a disaster but something that will keep you working far longer than you should have to.
Although retiring before 60 may seem unusual, it is very possible. A few simple and early decisions can make all the difference in the world. And a lot of it boils down to this: Start your retirement planning as soon as possible, regardless of whether retirement seems close or far away. Each year of saving for retirement allows your money to grow. Earlier investment is not just a little better — it is an incredible advantage. And early planning helps you to navigate the unpredictable waves of life. Don’t get discouraged if you haven’t started yet. Starting now is the best thing to do, no matter what.
Make Decisions Based on Your Needs and Goals
How much should you set aside for retirement? 70 percent of your annual pre-retirement income is a good rule of thumb for a quality retirement. Exceptions apply for everyone, however, because of personal spending habits, mortgages, child support, and other financial needs. So how do you get there? How do you end up with what you need?
When planning for retirement, draft a simple plan that addresses your current needs and asks questions about your future goals. Your answers will help to define how much money should be invested in retirement. Do you plan to travel more? Is financing a second home a possibility? What kind of lifestyle do you want to maintain? These are all questions that can help you make decisions. Luckily, financial advisors like ours can help you determine the answers to those and other questions. Once you have those answers, they can also assist with managing your investments to make those goals attainable.
Seek Diversity When Planning Your Investments
Your investment portfolio should include a mix of taxable and tax-free income sources. Taxable retirement plans — such as mutual funds and municipal bonds –– offer flexibility and fewer restrictions for investors. Roth IRA and traditional IRAs offer tax advantages and tax-deferred growth. With a traditional IRA, you can reduce your annual tax payments by adding tax-deductible contributions up to IRS limits. With Roth IRAs, contributions occur with after-tax dollars and do not result in tax deductions. In contrast to the withdrawals from a traditional IRA, the government does not tax your withdrawals from a Roth IRA. There are benefits and drawbacks to both. Do research and ask questions. The right decision is hard to make without the right information. But, rest assured, the right answer for you is out there.
Plan for the Unanticipated Costs
As you think about your retirement goals, keep future risks in mind. Healthcare becomes a bigger issue after retirement. Ever-changing copays and other unpredictable expenses; limited Medicare plans; long-term care services: all issues to keep in mind. Along with helping you with investment planning, our financial advisors can provide risk assessments that study how your risk tolerance matches with the investments that you consider.
Don’t confuse worrying with working.
- Do research,
- Talk to an advisor,
- Invest early.
It’s hard to go wrong with the right preparation.