We also participated in Retirement Planning Part One – Take Control of Your MoneyRetirement planning is the process of determining retirement income along with the actions and decisions needed to achieve it. After you have the basic knowledge of understanding, controlling, and maximizing your money, it’s time to look at the details, from deciding when to retire to reviewing your options for retirement accounts and investments.
Before we dive into the actual process of retirement planning, we wanted to reiterate some of the top tips from Part One:
▪ Understand your money, including how much you put in, where your money goes, and how spending habits affect your financial potential.
▪ Set a budget and stick to it so that every dollar has a purpose.
▪ Create a plan to put your money to work, whether it be through regular savings, retirement, or investments.
▪ And last, but not least, get emergency savings worth at least $1,000 and we do Not Draw from your 401k if possible. If you feel secure in your current financial situation, let’s discuss the next steps with some questions you might be asking yourself.
When can I retire?
The answer to this question comes from when I wasant For retirement, what you hope to achieve after retirement, and when you will have enough money saved to offset the income you currently receive from work. In addition to being able to afford basic living expenses, you also need to have enough money on hand to be able to live your life to the fullest after leaving the workforce.
Here are some questions to consider when planning your retirement schedule:
▪ How much do I need per month to pay my bills?
▪ Do I have any major life expenses on the horizon?
▪ How much debt do I carry with me?
▪ Will I qualify for Social Security?
▪ What do I want in retirement?
Obviously, there is a lot to consider when contemplating retirement. We suggest meeting a fortune counselor to gain insights from a professional and chat about your situation. Meanwhile, check out Retirement calculator library To see how your current retirement plan is preparing you for the long haul.
The best retirement plan for me?
On top of deciding how much you need to save for retirement, you also need to decide where to save that money. Unfortunately, retirement plans aren’t one-size-fits-all, and depending on your employment situation, there are a lot of different options to consider. The two most common options are:
▪ 401(k) or other employer-sponsored plans
These accounts are usually the easiest to set up and maintain as employers offer automatic payroll deduction for deposits into a retirement account, leaving all other work to be done on the back end by the retirement plan administrator. Your employer may offer to match part of your contribution to a certain percentage – and you never want to miss out on free money.
▪ Individual Retirement Account (IRA)
If your employer does not offer a retirement plan, your next best option would be to create an IRA. These accounts put you in charge, allowing you to choose the type of IRA as well as the institution through which it is funded.
Compared to workplace retirement plans, an IRA account offers a much wider range of investment options. You can also decide how and when to get a tax break by choosing between a Roth IRA or a Traditional IRA.
If you are self-employed or own a small business, there are options for you as well. With SEP IRAs, 401(k)s, and nonqualified annuities, we suggest talking through these options with a financial advisor.
How do I know what to invest?
Another great way to save for retirement is to invest. This is a great question and something to discuss with a trusted wealth advisor. Which investments are appropriate for your specific situation depends on how long you have until you need a return on money and how comfortable you are with the risk.
The general rule is to invest more aggressively in stock-based investments when you’re young, as you have more time for your money to weather market volatility. From there, you can slowly shift to more conservative options as you get closer to retirement.
Let’s Talk Money is powered by CommunityAmerica Credit Union And this week’s feature comes from wealth advisor Scott Adams. Saving and investing for retirement is an evolving journey.