Planning for retirement can seem like an intimidating feat. You may feel overwhelmed trying to keep track of every bit of information, or you might not know where to start.
We’re here to help you out. Get started with this simple retirement planning guide, where we break down how to plan for your retirement in five easy steps.
Planning your retirement in 5 simple steps
Determine what your retirement goals will look like
Your goals have a direct impact in what your retirement planning will look like. If you’re not planning on retiring in the next few years, your plan doesn’t have to be set in stone yet. However, you should at least have a general idea of what you want to do.
Whether you want to buy a boat, live in another part of the world, or move closer to your family, your future plans will determine how much money you’ll need to save up.
Choose your retirement date
This will determine your retirement timeline. The more time you have, the more risks you can take in your portfolio.
Knowing how many years you have to save up for your goal will also be crucial in building an accurate and successful retirement plan.
Depending on your retirement date, your Social Security and pension payment distributions may change as well. You’ll want to calculate your estimated payments and keep this number handy for the third step.
Calculate how much it will cost
Next, you’ll want to create a budget for your retirement plan. You’ll want to be realistic, but you’ll also want to have some extra funds saved in case of unexpected bills and expenses. Consider any traveling you’ll want to do once you retire, and if you will be gifting your children and grandchildren money for a new house or for college tuition.
Essentially, you should be practical with your budget while taking into account the lifestyle you want to live. If you’re not sure where to begin, your current expenses are a great place to start from.
Draw up your savings plan
Determine how much you’ll need to save for your retirement by following these steps:
- Combine your combined pension and Social Security payments
- Take that number and subtract it by your estimated expenses from the previous step
If your expenses are higher than your payments (what’s called an income shortfall), you must cover the rest with your savings. In this case, multiply your annual income shortfall by 25 to get your savings goal, the amount you’ll need to save in order to retire comfortably.
To find out how much you’ll need to save from this point onward, take your savings goal and subtract the amount you currently have in savings. Divide that by the amount of years you have left until your retirement date, and you’re left with how much money you need to save every year until then.
This is the longest step, and one that requires patience to see results. Consider working with a retirement planner to help you get the most out of your investments.
Start now so you have all the time you need to plan for your retirement. Additionally, starting earlier gives you more time, making your retirement timeline a more feasible one.
Learn more about retirement
Don’t put off your future happiness because you don’t have all the information you need now. Get in touch with a financial expert and plan for your retirement today.
This retirement planning guide is a start, but if you want the guidance of seasoned retirement experts, look to the financial professionals at OWLFI. Their team helps people like you plan for their retirement with confidence.
If you have any questions or concerns, contact them on their website today.