Many people think of retirement as a time when they can simply kick back and do nothing for the rest of their life. While this will make some people happy, others may want to travel and do things they never could before; but the truth is that none of it will happen if you do not make plans for retirement.
Taking time to seriously think about your retirement is essential if you want to have financial security during that time of your life. This is even more important in a day when money does not come easily for many people, and saving money for retirement cannot be done without sacrifice. For them, making plans for retirement early is essential if they are going to be able to retire at all. The Department of Labor says that many Baby Boomers are unprepared, and one of the reasons is simply because they failed to make plans for retirement.
Start to Build Retirement Savings Early
One of the most important things that you can do to have a financially ready retirement is to start early. With the power of compounding interest, having a sizable sum in the early years will build to a nice sum by the time you retire.
Calculate How Much Is Needed for Retirement
Before you make any concrete plans for retirement, it is necessary to figure out how much you will need to have saved before you can retire securely. Arriving at a good figure can only be achieved when you include such things as possible medical and dental costs, and money for special things you want to do during your retirement years, such as travel, etc.
It is also important, says RetirementPlans.org that you look into expenses which may reduce your monthly earnings. This includes things like taxes (if applicable), costs and fees to maintain the account, and possible losses if your money is being invested in some way in the stock market
Choose Your Retirement Plan Carefully
In order to ensure that your money is going to be there when you need it, your plans for retirement should include some diversification. Of course, if your employer offers an IRA or 401(k) with matching funds, you will want to at least put into it enough to get the maximum matching funds possible. Taking advantage of this kind of plan is your best option because, in many cases, you also get to reduce your income by the amount of your contribution.
Do Not Retire Too Early
Retiring too early is a problem for some people. They are determined to quit working as soon as they can, and may not be performing the necessary calculations as thoroughly as they should. If you take Social Security too soon, reports CBSNews, this will greatly reduce your income. Waiting a little longer could give you as much as another 8 percent per year – which is hard to beat anywhere.
You should also remember that people are now living longer – which means that even more money will be needed as you make plans for retirement. Doug Wheat at the New York Times says that a 65 year old couple today has a 45 percent chance of one person living to 90, and a 20 percent chance that one person will live to be 95.