Are you nearing retirement age, or do you have older family members who are? Retirement planning can be a daunting task, but it’s important to make sure you’re taken care of in your golden years.
Here are 6 important steps to take to create a solid retirement plan.
Retirement Planning: What It Is
Retirement planning is the procedure of figuring out how much money you need to save to live comfortably after you retire. This involves considering factors like your expected retirement age, lifestyle, and health care costs.
There are a few different approaches you can take when retirement planning. The most important thing is to start as early as possible to have more time for your money to grow.
Eligibility
To be eligible for retirement benefits from Social Security, you must have worked in jobs covered by Social Security for at least 10 years. If you have not worked in a job covered by Social Security, you may still be eligible for benefits from the Railroad Retirement Board. To get an estimate of your future retirement benefits, you can create a Social Security account.
To be eligible for retirement benefits from the federal government’s Thrift Savings Plan (TSP), you must be a current or former federal civilian employee covered by the Federal Employees Retirement System (FERS). You are automatically enrolled in FERS if you were hired after 1984 and are not already covered by another retirement system.
What Does It Cover?
There are two main types of retirement plans: defined benefit plans and defined contribution plans.
A defined benefit plan is a retirement plan where your benefits are determined based on your years of service and your salary history. The most common type of defined benefit plan is a pension.
A defined contribution plan is a retirement plan where you and your employer contribute money to an account used to fund your retirement. The most common type of defined contribution plan is a 401(k).
When Can You Retire?
The age at which you can start receiving Social Security retirement benefits is gradually increasing. For people born in 1960 or later, the full retirement age is 67. If you retire before your full retirement age, your benefits will be reduced.
You can begin withdrawing money from your TSP account as early as age 59 1/2 without incurring any penalties. However, if you withdraw money before you reach age 62, you will have to pay income taxes on the amount withdrawn and a 10% penalty tax.
It’s important to note that you can continue working after you start receiving Social Security retirement benefits. In fact, doing so may increase your benefit amount.
6 Steps to Take To Prepare For Your Retirement
1. Understand Your Time Horizon
Your current age and the anticipated retirement age begin to lay the foundation for an effective retirement plan. The longer the time until retirement, the greater the degree of risk your portfolio can handle. If you’re young and have 30 or more years until retirement, you’ll want to put a large portion of your funds into riskier assets like stocks. There will be swings in value, but equities have outperformed bonds by a wide margin over extended periods. The term “long” is important here, meaning at least 10 years or more.
2. Figure Out How Much Money You Need To Retire
This is often referred to as your “number.” It’s the dollar amount you’ll need to have saved to cover your expenses throughout retirement. There are many ways to calculate this, but a good place to start is by estimating that you’ll need 70-80% of your pre-retirement income.
3. Create A Savings Plan
Once you know how much you need to save, you can develop a plan to get there. This will involve figuring out how much you can afford to set aside each month and where you’ll invest those funds. If your employer offers a 401(k) or other retirement savings plan, be sure to take advantage of it. Many employers offer matching contributions, which effectively means free money for you.
4. Stay On Top Of Estate & Tax Planning
Another important element in a comprehensive retirement plan is estate planning, which involves various specialists, such as lawyers and accountants, in their respective fields. Life insurance is also an essential component of an estate plan and retirement planning process. Having a good estate plan and life insurance coverage can help ensure that your assets are distributed according to your wishes and that your loved ones do not suffer financially after your death.
A well-defined strategy also aids in the prevention of an expensive and often time-consuming probate procedure. Tax planning is another key component of estate planning. If someone wants to give property to family members or a charity, they must compare the tax consequences of either giving them away or passing them through their will.
5. Review Your Progress Regularly
It’s important to regularly review your retirement savings plan to make sure you’re on track to reach your goals. If you’re getting closer to retirement age, this might mean yearly check-ins or more frequent reviews. At a minimum, you should rebalance your portfolio once per year to ensure that it continues to align with your risk tolerance and time horizon.
6. Assess Risk Tolerance vs. Investment Goals
Investors with a long time horizon can afford to take on more risk because they have the potential to ride out any short-term market volatility. On the other hand, investors closer to retirement age will want to focus on preserving their capital and may need to accept lower returns in exchange for stability.
Additional Strategies
In addition to the steps above, you can do a few other things to help ensure a comfortable retirement:
1. Save automatically
One of the best things you can do for your future self is to set up automatic transfers from your checking account to your savings account or retirement fund. You’ll never even see the money and won’t be tempted to spend it.
2. Invest in yourself
Investing in yourself is one of the best things you can do for your future. Whether taking classes to improve your job prospects or simply reading books to stay sharp, continuing to learn will pay dividends down the road.
3. Live below your means
Retirement planning is all about making sacrifices today to enjoy a better tomorrow. If you can curb your spending and live below your means, you’ll be better positioned to save for the future.
4. Stay healthy
Last but not least, it’s important to stay healthy both mentally and physically. This will help you enjoy retirement more, but it could also end up saving you money on healthcare costs down the road.
Retirement planning is a marathon, not a sprint. By starting early and making smart decisions, you can ensure a comfortable retirement for yourself. Just remember to stay disciplined, stay the course, and don’t let emotions get in the way of your long-term goal.
Wealth Management: Retirement’s Planning Best Friend
Planning for retirement is like training for a marathon—if you want to cross the finish line, you need to put in the work ahead of time. Just like runners need someone to help them stay on track and avoid injury, investors need wealth managers to keep their portfolios healthy.
A good wealth manager will do more than invest your money—they’ll also help you plan for retirement by providing guidance on how much to save, where to invest, and when to start taking withdrawals. They can also help you navigate life’s other financial challenges, such as buying a home or sending your children to college.
If you’re serious about planning for retirement, working with a wealth manager is one of the best things you can do for yourself. They will help you stay on track, but they’ll also give you peace of mind knowing that someone is looking out for your best interests.
The Bottom Line
Retirement planning is a complex process, but it doesn’t have to be daunting. By taking the time to understand your goals and develop a plan to reach them, you can ensure a comfortable retirement for yourself. If you need help along the way, don’t hesitate to seek out the assistance of a wealth manager. With their guidance, you can rest assured that your retirement is in good hands.
Take The First Step To Your Dreamed Retirement With Nesso Wealth
Do you have a retirement plan? Do you know how much money you will need to have saved by the time you retire? If not, don’t worry—you’re not alone. According to a recent survey by GoBankingRates, 46% of Americans have no retirement savings.
But even if you don’t have any savings yet, it’s never too late to start planning for retirement. And with the help of a wealth manager, it can be easier than you think.
Our wealth manager can assist you in developing a retirement plan that fits your unique circumstances and goals. They can also provide guidance on how much you need to save and where to invest your money. If you’re already retired, they can help you navigate your finances and make the most of your retirement.
If you’re ready to start planning for retirement, contact Nesso Wealth today. We will work with you to develop a personalized plan that fits your needs and ensure that you are on track to reach your goals.
Get started today and take the first step towards your dream retirement. Nesso Wealth is here to help.
