Important Facts And Information About Retirement Planning
Retirement planning is the process of allocating resources/finances for retirement. The main goal is achieving financial independence during retirement so that employment or work becomes an option as opposed to a necessity. Retirement planning aims to do four main things namely;
- Assess an individual’s readiness to retire given a desired lifestyle and retirement age.
- Identify the actions needed to improve a person’s readiness to retire.
- Acquire financial planning knowledge/information.
- Encourage saving practices.
Having looked at the aim of retirement planning, let’s now shift our focus. It’s impossible to plan successfully for your retirement if you don’t know what you need to do. Below are the main steps to successful retirement planning.
3 main steps to successful retirement planning
Retirement planning is undoubtedly one of the hardest financial tasks anyone can choose to undertake. This can be attributed to the fact that everyone wants to retire in style which requires years of sacrifice and planning. Retirement planning also requires a significant amount of resources if you intend on spending the rest of your golden years free of financial stress. Below are 3 steps that will help you secure your retirement exactly how you want it to be.
- Create your target goal
- Assess your progress
- Make a plan
This is the first most important step to consider if you want retire in style. You must find out the exact amount of money you will need to retire comfortably or luxuriously depending on your preferences. In most cases, you need between 70 - 90% of your pre-retirement income during every year of retirement to maintain your current standard of living. If you are planning on upgrading your lifestyle, you will obviously need more than 100% of your pre-retirement income every year for a number of years (depending on the life expectancy).
You also need to consider factors like; vacationing habits, medical expenses, new homes among other expenses when creating your target goal. The main aim of this step is determining how much you need to save and for how long. You can use life expectancy calculators to estimate how long you expect to live based on your lifestyle habits.
After establishing a target goal, the next step is assessing how well you are doing. After establishing how much money you have saved already in retirement plans, the next step is factoring variables like government benefits, upcoming salary raises, the inflation rate, the rate of return on your investments and the value of other assets you have.
In most cases, you may not have all the answers however, you will need some rough estimates. There are readily available tools online that can help you access your retirement planning progress. For instance, you can use LifeAnnuiites.com’s annuity calculator to get projections of how much guaranteed monthly income you can receive based on your current savings.
This is the last most important step to successful retirement planning. All the above steps are useless if you don’t take action. Since you already know where you are and how much money you need to have enough money to retire as planned, it’s time for you to close the gap.
This means increasing your annual retirement contributions, eliminating outstanding debt i.e. car loans, credit card charges, student debt e.t.c. This step can also mean delaying your retirement or living frugally before & after retirement. The most important thing is making a concrete plan that will ensure you retire with the kind of resources you had wished for.
You also may like to read: 4 Key Retirement Planning Decisions
How do you boost your retirement savings?
Boosting your retirement savings is easier said than done. It is however a most important factor to consider since many people feel they aren't contributing enough to ensure they enjoy their retirement. Boosting your savings is therefore one of the most important parts of retirement planning.
One way of easing your concerns about your saving rate is using a retirement planning calculator. Regardless of your age, retirement progress e.t.c., it is still possible to reduce your expenses to boost your retirement account/savings.
5 main ways to boost your retirement savings
- 1. Pay off expensive debt
- 2. Compare investment fees
- 3. Assess your housing costs
- 4. Compare earnings on all your saving vehicles
- 5. Eliminate all unnecessary spending habits
This is one of the best ways of securing your future financially. You can’t successfully plan for your retirement if you still have debt. You have to be debt free which means paying off your credit card debt, mortgage, car loans among other kinds of debt that demand high interest payments. Successful retirement planning is all about retiring debt free with enough money to sustain the lifestyle you want for life. You can only achieve this by paying off all debt first.
A lot of money gets paid as investment fees in retirement investments. This can be attributed to the fact that retirement investments are usually huge sums of money. It is possible to save thousands of dollars by comparing different plans. You shouldn't just settle for any kind of retirement investments without finding out how much it will cost you and what other retirement investments are offering.
Housing costs take up a very big percentage of your household income. It is therefore important to assess how much you housing costs are to find out if you are paying or spending more than you should. You should be open to downsizing and investing the savings.
If you save approximately 6 months income in a fixed deposit account, you may need to consider moving the cash into more lucrative investments i.e. annuiites since such investments offer a higher return on your savings.
This is another perfect way of boosting your retirement savings. If you assess your spending habits every month, you will definitely find some unnecessary expenses you can eliminate easily without making drastic lifestyle changes. Such expenses include; restaurant meals, alcohol, shopping for shoes and clothes e.t.c. Eliminating such spending habits can go a very long way in boosting your savings to levels that allow you to successfully plan for retirement.