Retirement Planning: 7 Tips To Plan Your Retirement Fund
Retirement is nearer than you think it is! Having a comfortable and secure retirement- financially, socially, and psychologically- is the ultimate goal.
As per research, you would need about 80% of your current salary after retirement. Social security benefits alone are not enough to support your entire life post-retirement. Thus saving and planning for your retirement beforehand is crucial.
Retirement planning defines your retirement goals and how you can achieve them. It includes identifying income sources, assessing expenses and cash flows, enforcing a saving scheme, and managing assets and risks.
Leaving a significant sum for your family, retiring early, or enjoying bucket-list goals. Whatever your goals are, proper retirement planning is the key!
Here are a few tips for working towards a financially stable and happy retirement.
1. Start Saving & Investing Early
The sooner, the better- it is 100% true in the case of saving and investing. Starting young in saving and investing is the main tip for designing a retirement plan. This way, you get lots of time to let the investment grow through compound interest.
Compound interest allows you to grow a small amount into a larger one. For instance, you invest $50 a month at 25 years of age. It’ll grow three times greater than if you invest it at 45. You can put in more money, but you cannot make up for the lost years you could be saving. So, it is better to start saving and investing now!
2. Know Your Retirement Needs
How much do you need to save for retirement? Some experts keep it at 80% of your pre-retirement income. Meanwhile, some deem it an understatement and maintain this figure at 100%.
The key is to calculate your personalized savings goals.
Weight in different factors- your life expectancy, post-retirement lifestyle, current cash flow, and saving habits. And, calculate how much you need to save. Also, keep lifestyle inflation in mind while planning and saving accordingly.
3. Take Advantage Of Your Employer’s Retirement Plan
Learn about your employer’s retirement saving plans, such as a 401(k) or 403(b) plan, and start contributing to it. These plans are usually tax-advantaged. So you can decrease your income tax as well.
Many employers even match the contribution you make. Not going for this is kicking away free money. Compound interest and tax reduction help you save a sizable sum in your retirement fund.
4. Earn Passive Income
One way to have a secure retirement is to earn more while working. Working more years or setting up a passive income source is the best way to do it.
Passive income is the one on which you don’t have to work actively after an initial set-up. Rental properties, peer-to-peer lending, and investing are some passive income sources.
5. Pay Off Your Debt And Mortgages
It goes without saying to pay off your debts while you are working. Getting rid of debts and mortgage is crucial to having a secure retirement. No debt/ mortgage to pay every month means you need to spend a lesser amount each month.
This way, your retirement corpus can last longer with the same living standard.
6. Protect Your Retirement Fund
Do not go any way nearer to your retirement fund until you retire. Do not use your retirement fund for other expenses. Set up an emergency fund for unforeseen expenses; so that you can protect your retirement savings.
Withdrawing from your retirement fund may lose your interest and tax benefits. If you are changing jobs, roll your current retirement plan to your new employer’s plan or an IRA.
7. Consult A Finance Expert
Consulting a financial expert is a good approach to planning your personal finance. An investment professional explains the details, helps you outline your goals, and offers sound advice depending on your needs.
Retirement planning is the need of the hour in current times. It is challenging to balance the realistic return expectations and desired standard of living post-retirement.
But, with some flexible planning, you can have a secure and comfortable retirement. Consult a financial advisor, estimate your needs, make a plan, and start saving now!
This article has been published in accordance with Socialnomics’ disclosure policy.