It Is Never Too Late To Start Planning For Your RetirementTweet
If you have just started your career, retirement may seem like a very distant horizon. You may think that you have decades to explore the corporate field and reap benefits before you have to worry about retiring. But whether you are a seasoned worker or just a newbie, it is never too early to start planning for retirement.
One big question most people have about retirement is, “How much should I save for retirement?” The answer to this question varies from person to person. However, if you observe your finances and spending patterns for a few months, it’s not too difficult for you to predict your needs in the distant future.
You need to figure out how much money you might need for your retirement years and start setting aside a sum from your every paycheck as early as you can. You can revise your retirement plan once a few years to stay on top of the changing finances and inflation.
Retirement is a big challenge for a majority of Americans. The US changes its age of retirement often. For the workers who are already retired, the average retirement age is 62 years. For currently employed workers, it is as high as 64 years. If you were born after 1959, your average retirement age is 67 years.
Sadly, one-third of working Americans are not confident that they will accumulate enough wealth to have a comfortable retirement. Even sadder, every one out of 12 Americans believes that they will never retire.
If you consider that you might live about 20 years after retiring, it is important that you plan every detail of your retirement. You may have to find answers to many questions like,
- How much should I save for retirement?
- What is the best retirement plan?
- How should I retire to have the best benefits?
- What should be the total of my retirement savings by the time I’m 45?
- Why is retirement important for me?
If we look at the US statistics, we can see how unaware the average American is about retirement. Almost 22% of the US workforce is unaware of the workings of a retirement fund and are not even educated on where their money is invested. A majority of IRA and 401(k) owners, 60%, are not skilled at managing them. And almost 43% of workers just guess their retirement savings instead of calculating exact values and expenses.
These statistics don’t stand a chance of getting improved in the near future. However, you can contribute to a positive change by considering your retirement plan early on.
The amount you should save up for retirement will differ according to your lifestyle. If you want a quick calculation, you should consider saving 10-15% of your pre-tax income, if you start a saving plan at the age of 25 years. You should also consider your current lifestyle and what you expect it to be after retirement. The worth of your investment in the 10 years to come should also be taken into consideration.
Some people have bigger plans for their retirement. Some want to move to a better city, with higher living expenses. Some want to travel the world. Others look for a more laidback, quiet setting after their retirement. Your plans for retirement may change in years to come, but it is wise to save up enough money to afford what you want afterward.
There are no hard and fast rules about how much you should save for retirement. It is up to you to decide the numbers that would give you everything that you’d want after retiring. Here’s what you can do to save up for your retirement:
Make a well-thought-out estimation of your future income needs and costs of living
Observe your current spendings and project your future financial requirements. You will notice the expenses that won’t go away after retirement and some expenses which would disappear after you stop working. Include some budget for leisure, travel, and healthcare needs.
Put your retirement plan down in writing and use a Retirement Calculator
Writing things down will give you more incentive to make them happen. Your written retirement plan will be a motivator for you and provide guidance where needed. The internet has many tools to help you along, so use them. Find a good retirement calculator for yourself and start putting in those numbers.
Open a 401(k) Plan and IRA Savings Account
These plans will both help you keep some money aside for your retirement. On the plus side, they don’t have any tax on the interest and earnings over the year! You are never too old to start investing for your retirement.
Set up an emergency fund for yourself
Setting aside some money in case of an emergency is never a bad idea. Experts say that you must have at least 6 months’ worth of living expenses set aside for emergency costs. It will also give you peace of mind knowing that you have something to fall back on if a crisis happens.