You are retirement-ready when you can satisfy all the critical milestones of adulthood, such as saving enough for your retirement expenses, estate planning, and living the golden years by adapting to the new lifestyle hassle-free. However, everyone has a unique requirement. Suppose you expect your annual retirement expenses to be USD$ 20,000. After considering social security payments, you can retire with USD$ 500,000 or less in your investment accounts. At the same time, some people may prefer a more lavish lifestyle that includes plenty of travel plans. They need more funds to meet their expensive choices. How do you sort this out?
Retirement planning is not a one-size-fits-all approach. Professionals like Harding Financial retirement planners can guide you. They emphasize that saving for retirement from your early years can be more empowering, but there is always time to start. You can approach retirement planning at different stages of your life, adapting to your unique circumstances.
• 20s to 30s
Most people in their early years spend more and save less. Please realize it's time to save money to reap the benefits of compounding interest. If you put USD$ 100 in a monthly retirement account at age 20 for 45 years, you will pay USD$ 54,000. However, you will accumulate over USD$ 200,000 by age 65 due to compounding interest. Please contribute more as you earn more to grow your investment money faster. Some employers match 401(k) contributions. Leverage the opportunity by contributing enough to make the company pay equally. Otherwise, you will miss out on the free money. However, keep taxation in mind when planning retirement. You will be liable to pay taxes whether you have an IRA or 401(k). In the beginning, your salary will likely be less. Opening a Roth retirement account can help, where tax applies to contributions, not capital gains or withdrawals during retirement.
• 40s to 50s
As you reach middle age, your life will be much different. Your kids will move out. You will no longer have to worry about your kids' college fees. Your compensation will also be high, reflecting a handsome disposable income. You can now opt for catch-up contributions towards the retirement account. Simultaneously, lowering your retirement portfolios' risks will also be good. After all, you cannot predict market conditions. In 2008, people suffered a lot for staying invested, hoping the market investments would be healthy. But their returns and retirement savings were severely hit.
• 60s
As you approach your mid-60s, you must choose a lifestyle for your retirement. Decide if you wish to travel or read books at home. If you want to lead the same life as your current years, you will want to save a minimum of 10 times your yearly salary in an account. Reducing your retirement portfolio risks will help because recovering losses becomes challenging once you start withdrawing money. Retirement planning can be complex, but you don't have to navigate it alone. Your financial advisor can help you plan well in advance for your retirement based on your income and requirements. Their expertise and guidance can provide you with the support you need. So, don't hesitate to consult them.
No comments:
Ask your question here