Saving for retirement is easier said than done, especially if saving money isn’t second nature to you. However, as your financial consultant will tell you, saving for retirement should start early in your career so you can benefit from compound interest. Engaging retirement planners earlier on in your life will help you come up with the best way to save for your retirement. Retirement planning involves more than just relying on a financial retirement calculator to get a summarized retirement number.
The following tips will help you plan for your retirement.
1. Establish How Much You’ll Need to Retire
Financial advisors suggest varying figures of how much you need to retire. Even so, most financial consultants recommend that you have enough money in your nest egg to withdraw about 70% to 85% of your annual income when you retire. However, this is a general figure that may not work best for you because it doesn’t factor in certain aspects such as future expenses and inflation. Although a financial retirement calculator may factor in some of these aspects such as inflation, it’s always better to engage a financial advisor.
Seeking the services of a financial consultant will help you calculate exactly how much you’ll need to retire and build a retirement roadmap ideal for you. Financial advisors will help you approach retirement from a more detailed perspective. For instance, will you have mortgage payments after you retire? Will you have kids in college who will need tuition and upkeep money? These are the intricate details that your consultant will factor in when building you a solid retirement plan.
2. Choose a Retirement Account That Suits You Best
There are many retirement accounts options available depending on how you work and where you work. They include 401 (k)’s, Roth I.R.A.s, I.R.A.s, 457s, and 403 (b)’s. Your financial advisor is best suited to help you sift through the many account options to find one that works best for you. Mostly, your options will be influenced by your place of work.
For instance, if you work for a for-profit employer, you’ll mostly have a 401 (k) plan. If you work for non-profit institutions like a school or a charity, you may have several retirement account options such as 403 (b), 401 (k), and 457 plans. If you’re self-employed or your employer doesn’t offer a retirement plan, you’ll have to set up your own retirement accounts. These include Roth I.R.A.s, Solo 401 (k) plans, S.E.P., and I.R.A.s.
It can be confusing to settle on one plan that will work best for you because you have to consider many factors such as taxes, caps, and what happens to your plan if you change employers or lose your job. It’s estimated that 55% of Americans retire sooner than they planned because of health reasons or having to take care of an elderly loved one. That’s why you need to engage a financial advisor to help you select or set up a retirement account with the most favorable terms to your bottom line.
3. Start Saving Early and Gradually Increase Your Contributions
The earlier you save for retirement, the more money you’ll have in your nest egg. You can start saving paltry sums of money and increase your contributions as your income increases. Starting early gives you a head start because the power of compound interest will benefit you.
Your financial consultant will help you identify other opportunities you can capitalize on to increase your retirement savings. For instance, taking full advantage of your employer’s match and capitalizing on catch-up contributions if you’re beyond 50 years. Your financial adviser will help you make the required adjustments to take advantage of friendly policy changes and also to avoid punitive policies. These are the perks you’ll miss out on if you only rely on a financial retirement calculator.
Properly planning for retirement will help you enjoy your after-work days. That’s why you should go beyond using a financial retirement calculator and engage retirement planners to help you set up a solid retirement roadmap.