Retirement is inevitable – no matter how much you adore your work, you will need to take it easy and accept your retirement. To move things smoothly, you will need sufficient retirement funds.
Retirement planning is thus essential for a safe, secure and stable future. With retirement planning done right, you can enjoy peace, comfort and bliss in your golden years.
Here are the nine easy steps to plan for retirement the right way.
1. Debt Management
If that mortgage is still outstanding, then you should think of increasing the monthly payments to pay it off as quickly as possible.
Keep credit card debt to a minimum. Try to make as many purchases as possible in cash. If you really want electronic payment convenience, then go for debit cards.
Your credit card use must be strategic. Use your credit cards to maximize your credit score. For example, keep your credit utilization rate no more than 10%. With a good credit score (through responsible credit card use), you can get low interest on student loans, car loans and the mortgage. The money you save on interest can go to your retirement fund.
2. Catch Up Contributions
Do your level best to boost retirement fund contributions up to the maximum amount permitted. Your retirement account should have enough so that you can qualify for employer-paid maximum matching contributions.
Remember that once you cross 50 years of age, you can save more up to a higher limit. You should take advantage of this to catch up on your retirement savings target.
You should also take a look at your previous retirement accounts with past employers. You can try consolidating these with your active account. You should talk to a financial expert to find out how you can contribute more with minimum tax repercussions.
3. Calculate the Retirement Income Needed for Withdrawals
After retirement, you should withdraw at a rate so that your funds do not deplete.
From employer pension and social security, you can estimate how much you can withdraw each month. The rest of your monthly income will then come through your retirement funds.
The question is: what percentage can you afford to spend from your retirement fund so that it does not shrink?
One popular general rule is that you can spend around 4% without depleting your fund. Hence, with a retirement fund of a million dollars, you can spend $40,000 per year from it after retiring.
4. Assess Retirement Expenses
You will have to realistically assess your expenses to plan for retirement. Unfortunately, this also means taking inflation into account, which may not be straightforward. You should talk to your financial advisor for more information in this regard. Failing to include inflation or underestimating a key expense can prove disastrous for your retirement plan.
For example, you may have higher healthcare costs. So you must be sure that you have good insurance that will suit your circumstances. Once again, you should talk to your financial advisor for a good healthcare plan.
5. Medical Costs
The importance of assessing medical costs cannot be overemphasized. When you are over 60, you will definitely pay more towards healthcare than when you were 30.
If you don’t have the right health insurance plan in place, then one medical diagnosis for a chronic illness that is expensive to treat or major surgery can wipe out your savings.
You must also assess the cost of hiring home health aides.
Do not put off buying a good health insurance plan. If you apply for health insurance when you get older, you will likely pay much higher premiums. You could even get rejected.
6. Planning Your Next Move
Once your children grow up and live independently, your home may prove to be too big for your needs. You could think of moving to a smaller home in a low-tax state.
On the other hand, you may want to move into a better location if your income permits depending on your lifestyle choice. Whatever you do, see the effects that it will have on your retirement planning.
7. Tap Into Your Funds Later
Whether it is Social Security or your retirement funds, you will want to tap into them later on in life.
Claiming social security later in life can be beneficial for retirement planning since your monthly withdrawal income (from social security) can grow by about 8% each year that you postpone withdrawals.
You can try out the social security benefits calculator to find out the right age to withdraw for maximum monthly amounts.
Unless you are a financial maestro like Warren Buffet and know exactly where to invest, you will need to diversify your portfolio for optimal security and growth.
You can diversify for any kind of risk tolerance. Stocks might seem risky, but the truth is that even after considering the worst financial disasters, their historical growth rate has been about 9%. Even the best highest paying bonds can’t match this percentage as they go up to around 3 to 4 percent maximum.
To reduce the risk of stocks, you can diversify through ETFs and index funds.
9. Money App
The Doctor Money is absolutely imperative for solid retirement planning. The smart app is designed to help you save more and more money for the future. With the Doctor Money app at your disposal, you can be virtually certain that you will have enough funds in the future for a comfortable retirement and financial independence.
The money app can be of great help to those who have fallen behind on their retirement goals. If retirement is approaching fast and you haven’t saved enough, then you must download Doctor Money App right away to start saving now.
Even if you are well on your way to your retirement goals, you can still use the app to save more. Besides spending money on yourself, you can also spend it on your loved ones in need.