According to AARP, 40% of baby boomers expect to work until they die. Additionally, many people in their mid-sixties cannot think of quitting their jobs. This is mainly because of the current harsh economic times where no one can afford to simply relax at home and enjoy their sunset years. Therefore, the need to plan for retirement is ever so imperative given the fact that as you age, your earning power reduces.
Wondering how to plan for your retirement? Here are crucial things you should do.
According to the Centre for Disease Control, you have roughly 20 or more years to live after retirement. This is enough time for inflation to catch up with you and deplete your savings. To counter this, you are advised to keep your money invested in money generating areas such as stocks and bonds. The returns from these ventures are normally commensurate with current economic times.
Have A Goal
According to Katie Brewer, CFP at LearnVest Planning Services, many people save for retirement without a particular goal, consequently shortchanging themselves when they have to quit their jobs. Brewer advises people to use the replacement ratio, which will help you calculate how much of your income you need to replace each year after retirement. She recommends planning to reinstate 70% of former income in order to live a comfortable life in future.
Do Not Procrastinate
Did you know that the magnitude of your retirement returns depends on how much you saved? This means that procrastinating to save, consoled by the fact that you have many working years left will deny you the retirement funds you deserve.
According to Brewer, there is no bigger advantage than starting early to save for retirement. She advises people to open accounts as soon as possible and set up automatic contributions from their paychecks. To increase your monthly contributions, Brewer recommends setting up a biannual or annual calendar which will remind you to review your monthly contributions based on current income.
Avoid Outsized Home Costs
Judy McNary, CFP® with Colorado-based McNary Financial Planning, says that approaching retirement with too much debt is a potential disaster. While certain debts are good, McNary cautions that massive real estate debt, for example Home Equity Line Of Credit (HELOC), should be avoided at all costs. In the event that you have such debt, she advises that you consider making pre-retirement loan repayments, to avoid eating into your savings.
Involve A Financial Planner
While this is not mandatory, engaging a financial planner will help you seal the unseen loopholes you would otherwise not see. While they are great at developing financial goals and strategies, you should ensure that you find a financial planner you can trust.
Basically, your sunset years should be spent enjoying the fruits of your labor and not paying back debts. Make sure that your life is planned out well and always remember to factor in inflation to cushion yourself against future economic uncertainties.