Retirement planning shouldn’t be put off until the last minute, yet many people don’t get serious about their retirement until they’re in their late 30s or 40s. Although there is no rule that says you have to think about retirement earlier, the sooner you prepare, the better off you’ll be. It goes without saying that your income will drop once you retire. If you don’t prepare and set aside enough cash, this can drastically impact your standard of living.
But things don’t have to end this way. With a great retirement plan in place, you can build a nice financial cushion, which can make your retirement years enjoyable.
Here are four steps for creating a great retirement plan.
1. Work with a financial planner. If you don’t know the first thing about planning for the future, don’t be afraid to work with a financial planner. These professionals are knowledgeable in various areas related to personal finance. They can educate you on your retirement options, plus make recommendations to ensure a comfortable nest egg when you’re ready to leave the workforce.
There is plenty to take into consideration when planning for retirement. You’ll have to estimate how much you’ll need during your retirement years, and then come up with a plan to generate a sizable savings. This is where a financial planner can help. The less debt you have in retirement, the better. And with a planner on your side, you’ll be advised on ways to maximize your savings, plus eliminate your debt.
2. Talk to your employer. Most employers offer 401(k) plans, which is an employee-sponsored retirement plan. Speak with your employer to see if you’re eligible to enroll. This option is an effortless way to save for your retirement. To put it plainly, your employer deducts a certain percentage from your check and these funds are invested in a retirement savings plan. Depending on the program, your employer may match your contributions, thus maximizing your retirement income. If a 401(k) isn’t an option, your employer may offer a pension plan, which is another retirement plan that provides income.
3. Diversify. Don’t rely solely on a 401(k) or an employer pension plan. There is no way to know for certain how much you’ll need in retirement, thus it pays to diversify and have other retirement plans. For example, you can talk with your bank and open an individual retirement account (IRA), thus creating a second stream of retirement income. You can also explore other long-term savings options, such as certificates of deposits and money market accounts.
4. Delay retirement. Who isn’t eager to leave the workforce? But even if you’re eligible for early retirement, there are sound reasons to postpone retirement if you’re in good health. The longer you work, the more you’re able to contribute to your 401(k) plan. Plus, the longer you wait to claim Social Security benefits, the more you will receive. People are living longer. And according to the National Center for Health Statistics, approximately 1 in 4 of all 65-year-olds will live to age 90. For this matter, you need a retirement savings that’s capable of carrying you for at least 25 to 30 years.