It’s never too early to start planning for retirement. In fact, the sooner you start saving, the better off you’ll be overall. But what if you’re on a tight budget and don’t know where to begin? Does that mean you can forget about retirement planning altogether? Absolutely not! With a little bit of creativity and dedication, anyone can successfully learn how to plan for retirement.
Retirement planning is a lifelong process that requires foresight, discipline, and a solid understanding of your personal finances. The goal of planning for retirement is to ensure that you have enough money saved to cover expenses during your golden years. Average adults in the United States can expect to retire in their mid-sixties and live well into their late seventies.
Learning how to plan for retirement has become increasingly important with many people living longer, healthier lives. While everyone’s financial situation is different, retirement planning almost always involves some form of saving and investing. Remember that a financial advisor can help you develop a personalized plan that meets your unique needs and goals. Here are some key things to consider when planning for retirement.
1. Start with a Savings Account
You may not have much spare cash to contribute to a 401(k) or IRA right now, but that doesn’t mean you can’t start saving for retirement. Open a separate savings account and make regular deposits into it. That way, when you do have a little extra, you can easily transfer it over to this account.
If you get a raise at work or come into some money, then try not to spend it all right away. Instead, put it straight into your savings account, or work with a financial advisor to set up a traditional or Roth IRA. They’ll take the guesswork out of saving and investing, giving you the peace of mind you deserve when learning how to plan for retirement.
2. Create a Budget
One of the best ways to save money is to create a budget and stick to it. Calculate your monthly expenses and look for places where you can easily cut back. Living within or below your means will give you an advantage when planning for retirement. Without a clear budget, it’s quite difficult to keep track of how much you’re truly spending each month.
There are all sorts of ways to save money if you’re creative and willing to make some sacrifices. For example, if you normally go out to eat at least 3 times per week, then challenge yourself to cook more meals at home. If you continue to pay for memberships that you rarely use, consider if they’re absolutely necessary, then cancel whatever you can.
3. Figure out How Much Income You’ll Need
It’s also important to estimate how much income you’ll need during retirement. Remember to include not only essential expenses like food, shelter, and healthcare, but also your discretionary spending for travel and entertainment. There are many free retirement calculators available online, but a trusted financial advisor will have many other helpful tools at their disposal.
4. Estimate Your Social Security Benefits
Social Security is a government aid program that provides benefits to retirees. Your personal benefit will depend on your work history and earnings record. You can easily estimate your Social Security benefit by creating a “my Social Security” account at ssa.gov. Keep in mind that Social Security is unlikely to cover more than 50% of your total retirement expenses.
Prepare to close the gap between Social Security benefits, what you have saved, and what more you’ll need for retirement. There are several options available to help with this process. These include delaying retirement, saving more money, investing in assets that generate income, and downsizing to a less expensive home. Also, consider partnering with a trusted financial advisor to streamline this process.
Ask Us How to Plan for Retirement
Planning for retirement may seem like a daunting task, but it’s important to start early and make sure you have a solid understanding of your personal finances. Working with a qualified professional can help you develop a retirement plan that fits your unique goals. If you still have questions about how to plan for retirement, then please don’t hesitate to reach out today. Our experienced financial advisors are always eager to provide the resources you need to retire with confidence.