Retirement preparation tips

Did you ever think that we all are expected to spend almost one third of our lives in retirement? That’s a significant number of years. Everybody has their own picture of retirement. For example, some people think of retirement as another opportunity to do something different, new and exciting, while others would rather relax and spend their days in an exotic destination they haven’t explored yet.

Either way, to live a financially secure retirement, it never hurts to start thinking and planning as soon as possible. Know your destination and your directions to reach it before you set out for your journey. It will make a much easier and less bumpy ride. A little planning will go a long way in creating your dream retirement.

Think years ahead in future

No matter what your age is right now, start thinking about the age you would like to retire. Make assumptions of what your expenses could be, including your health care costs and daily expenses. If you plan to travel, add those costs too. Off course nothing is permanent and you will have to make changes along the way, but it will give you a start and some realistic idea of your goals; online tools will help you do just that. Finance experts agree that a person will need around 85-90 percent of their pre retirement income to meet their retirement needs, so plan accordingly.

Involve everybody in your family

Talk to your spouse about their view of the retired life. Sit down with her/him and make a list of your shared views and your differences. Think about how you would like to spend your time together after retirement. Will you consider moving to some other place? Or does living in a retirement community suit your preference? Also, as a parent, you might want to consider all the costs related to health care, education and college funds for your kids. If your kids are old enough, then teach them about savings.

Put everything into writing

The psychology experts say that writing down something gets you closer to making it a reality. So write down everything. Take all the expenses in to account and don’t forget to write down important points and goals. Prioritize your expenses such as whether to pay the car premiums first or buying the big screen TV. Once you and your family gets used to this, all of you will automatically know and accept where to cut the expenses if you are on a budget.

Be prepared for the unexpected

If you are well prepared, then you will be in a better position to deal with financial situations than those who did not plan for whatever life throws their way. Hoping for the best and planning for the worst is the best strategy to give you more mental security. Make sure you invest in proper health care insurance, life insurance, long-term care insurance and home insurance. Keep rainy day funds secured in case of a financial emergency. Experts agree that people should keep at least 3-6 months’ worth of cash on hand, either in a separate bank account or mutual fund that is readily available. Take all these expenses in to account when you are planning for your retirement. First, make savings for these and then invest in the retirement savings.

Start as soon as possible

As soon as you get some financial stability, start investing towards your future. If you are employed or self employed, there are plenty of retirement plans available to choose from, each of them with many different options regarding how much and how frequently you would like to contribute. It’s no secret that a 401(k) is a great start for retirement savings, but you might want to consider supplementing it with some other tax advantaged retirement savings account such as a Roth IRA. Try and stay on track by making regular contributions. That way it will be easier if you set up a direct deposit from your bank account or automatic withdrawal from paycheck.

Don’t put all your eggs in one basket

Relying only on Social Security may not be enough for your retirement needs, so invest in other retirement plans or life insurance annuities; if you are self employed, a SEP IRA will let you put some extra money away tax free. All these plans will save a considerable amount provided you follow all the guidelines. These tax breaks can make a real difference in the long run. If you want to invest in stock and bonds, then study a company carefully before you invest and always keep in mind that it involves risk. The value of your money may raise or fall, so be prepared for that. Remember to never put all your eggs in one basket and distribute your investments in variety of options.

Invest wisely and research your options

Always research and study your options before making any decision that will fulfill your retirement objectives, read the fine print. Know the rules and regulations that come with your chosen retirement plan. Plans like 401(k)s let you make tax deductible contributions, but when you withdraw money, you pay taxes on the total amount you receive. Many employers will match your contribution to a 401(k) offering you free money. Roth IRAs let you make tax free contributions and you are not taxed at the time of withdrawal if you withdraw after five years of contributing. If you are self employed, a self-employment IRA will let you put some extra money away and save with a tax deduction.

Taking in account the increasing life expectancy, rising health care costs and fears of recession, we all face the challenge to put aside enough money for us to last throughout retirement. In conclusion, to build your nest egg, you will need discipline, patience and commitment. Design a plan and stick with it, and soon you will be on your way to your dream retirement.