Most Americans hope to retire by the age of 62; most Generation Ys want to retire at 59 while baby boomers plan on retiring around 68.
Regardless of your age and what your preferences are, there will come a time when you need to stop working and enjoy your later years. And when that happens, you want to be financially prepared so you don’t have to worry.
If you haven’t thought about retirement planning, then it’s about time you did. Starting early will ensure financial success, so read on for 3 tips that’ll help when preparing for retirement.
1. Determine How Much You’ll Spend in Retirement
Most people think they’ll reduce spending to 70% or 80% of their pre-retirement years. However, many retirees end up spending more and run out of money, as they don’t realize that without work, they have more time to go out and spend money!
It’s best to budget for a 100% ratio, especially if you’ll have an unpaid mortgage. This can also help pay for unexpected medical expenses, even if you’ve got a good insurance plan.
You should also consider that the cost of living is increasing every year, so you’ll need to factor this in too.
As a rule of thumb, you should put away 15% of your gross annual earnings starting in your 20s. But if you’re already in your 30s, it’s not too late! You just need to put away more every year.
2. Read Up on Taxes and Benefits
Unfortunately, your retirement income will be taxed. So when you’re budgeting for your golden years, you need to take this into account. Certain sources of income will be taxed more than others (such as stocks), so read up on the fine print.
You’ll also want to find out when it’s most beneficial to start claiming Social Security benefits. There are online calculators you can use to find out optimal times. You can also speak to a financial advisor (more on this later).
3. Consult With a Financial Advisor
For more direction and wiser planning, it can be worth it to consult with a financial advisor. They can help with saving for retirement in the best ways possible, as they have years of experience and knowledge.
These experts can help you set financial goals and go over everything so you fully understand and are fully prepared for things like taxes and benefits. This can prevent nasty surprises from arising in the future.
It’s Never Too Early to Start Preparing for Retirement
With the above tips, you’ll have a good start when preparing for retirement. Financial security in your golden years will definitely be attainable!
If you can afford to do so, we recommend consulting with a financial advisor. Even if you’re still young, getting a head start and planning your retirement years now will pay off in the future!
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