How to Plan Financially for Your Retirement

Tuesday, August 18, 2020, 6:00 AM | Leave Comment

Planning for your retirement is something you need to consider while you still have a lot of energy.

You’ll need to have a fun, secure, and comfortable retirement, so you must build a robust financial foundation early.

Your planning should be guided by your retirement goals and how long you’d want them met. Think about the retirement accounts that can help you secure your future.

Here are five steps you can take to ensure you are financially cushioned in your retirement.

How to Plan Financially for Your Retirement

  1. Consider The Time Left Until Your Retirement

    How old are you now? At what age are you supposed to retire? These are some questions you have to ask yourself. The difference between your age and the expected retirement age will give you the time left to work on your retirement strategy.

    If you still have several years before you hit the retirement age, you can think of high-risk investment options. For example, if your retirement is three or so decades away, investing in stocks can be your best option. Though stocks are volatile, they give better returns when held for long periods, say over ten years. If your retirement is just around the corner, you’ll need low-risk investment options.

  2. How Much Will You Need to Spend After Your Retirement?

    You need to come up with an expected post-retirement budget. Your spending habits will change, but not so much. When you stay at home most of the time, you may find that you’ll spend more on entertainment than you used to spend previously. This is because you’ll have a lot of free time shopping, traveling, entertaining guests, going on vacations, going sightseeing, and engaging yourself in many other expensive adventures.

    So, as expenditure in other areas like transport goes down, some spending lines will crop up. So, to be safe, assume that your monthly spending will remain the same even after retirement. Knowing that your cost won’t change, you must start thinking about where the money you’ll be spending. If you expect some pensions, you’ll need expert pension advice on how you’ll spend it wisely so you can continue leading a comfortable lifestyle.

  3. Consider the After-Tax Rate of Your Investment Returns

    Once you consider the number of years left before your retirement and the amount you must spend in retirement, you need to calculate the after-tax rate of your investments to see if they can cover your expenditure after retirement without you outlasting your savings.

    Remember that, even if you’ve invested in long-term assets, expecting a return rate of 10 percent or more (before taxes) would be unrealistic. As you grow old, the return rate will go down as the low-risk assets you invested in comprised mainly of fixed income low-yield securities.

  4. Assess Investment Goals vs. Risk Tolerance

    Whether you have a financial advisor or are making your own investment decisions, it’s advisable to balance your investment portfolio’s allocations to meet your return objectives at your risk tolerance level.

    The simple question is, what level of risk can you willingly take to meet your financial objectives. Well, this can be a tough decision if you don’t have any training in financial management. You may need to hire a trusted expert who has your interest at heart to diversify your investment to lower your risk.

  5. What About Your Estate?

    Estate planning is another crucial step to consider as you approach your retirement. This may require you to hire experts in different professions, such as accountants, lawyers, and even estate managers.

    As you think about your estates, you may also plan how your properties will be distributed when you can to the end of your life. You can think of having a will to prevent any disputes that may arise after your death.

Wrapping It Up

Planning for your retirement is something you should start as early as today. The longer you wait, the more time you’ll waste. Even if you just got a job right from college, retirement planning is something you don’t need to procrastinate about.

Being financially stable in your retirement will ensure you aren’t a burden to your family members. Above all, think about how you’ll pay for healthcare once you retire. Whatever financial decision you make, seek advice from trusted experts in the various fields you’ll be dealing with, be it healthcare, insurance, finance, or estate management.

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