4 Necessary Steps to Take When Planning Your Retirement
When it comes to retirement planning, there are two main rules that you should follow. The first: You are never too young to start planning. The second: There is never a better time to start than today. Regardless of whether you are in your mid-20s, late 40s or older, there are a few key steps to take to prepare yourself for your retirement years.
1. Determine Your Retirement Budget
Many individuals fail to take this important first step, and they immediately skip to the second or even third step. However, before you can know how much money you need to save for your retirement years, you do need to have a target number in mind that you want to reach. Keep in mind though, the farther away you are from your retirement age, the more likely this target number is to change over time. This is because factors like your own lifestyle, inflation and more may change and may affect the amount of money you need for retirement. However, by taking time today to prepare a budget for your retirement years, you can give yourself a rough idea about the amount of money you may need to live comfortably in your retirement years.
2. Develop a Retirement Plan
As a second step, you should develop a plan for how you will transition from your current financial state to your projected or desired financial state. For example, if your retirement budget includes no car payments, credit card payments or mortgage payments, part of your retirement plan should include a plan to eliminate these debts from your life. The plan should also determine how much money you need to save on a regular basis in order to sustain your projected lifestyle. Keep in mind that there are numerous online calculators that can be used to help you determine how much money you will need to save and how quickly that money may grow through various types of investments and retirement accounts.
3. Open Retirement Accounts
After you thought about your retirement future, it is time to take action and get started working on your retirement plan. Research the different types of retirement accounts available, and set up automated withdrawals or drafts to fund your accounts. When you create auto-drafts, you will not have to think about your retirements regularly. Instead, you will simply need to monitor the progress of your retirement efforts periodically over time. You will not have to worry about forgetting to make a deposit because it will be made automatically.
4. Monitor Your Progress
As a final step in preparing for retirement, make an effort to monitor your progress. If you are decades away from retirement, you may be comfortable reviewing your accounts every few months or only several times per year. If you are rapidly nearing your retirement age, it may be necessary to monitor your progress on a monthly basis. The purpose of monitoring your progress is so that you can identify the need to make changes to your plan as necessary. Life events, major economic changes in the world and more can all impact retirement plans. Therefore, keep in mind that even the most thoughtfully developed retirement plan may need to be adjusted periodically.
To enjoy a successful, carefree retirement, proper planning is necessary. By following these four steps, you can easily begin planning and preparing for happy and relaxed retirement today.