The average American spends about 20 years in retirement and less than half of them have calculated how much they need to save for retirement. It is very important to plan in advance for your retirement years so that you can maintain your standard of living and be stress free when it comes to dealing with financial issues in your senior years.
I would highly recommend reading “Retiring Soon? Four Things You Need to Do to Get Ready” for some tips on how to prepare for retirement. Here are a few additional tips you can follow to help you plan:
Know Your Needs: Retirement is not cheap. To maintain your standard of living you will need about 70 percent of your pre-retirement income. Planning ahead is crucial! Make sure you plan for 20 or 30 years of living on a fixed income.
Create a Financial Plan: Create a plan with a certified financial planner or if you are financially minded use a computer software program to help plan for your retirement.
Save, Save, Save: Set goals and stick to your goals when it comes to saving. If you are not already saving it is time to start. Try starting small and increasing the amount you save each month.
Learn about and Contribute to Employer’s Savings Plan: If your employer offers a retirement savings plan, sign up and contribute what you can. Research how much you would need to contribute to get the full employer contribution and how long you need to stay in the plan to get the money.
Pay off Major Debts: Make sure to pay off any major debts you might have like home mortgages or college loans. These are important to take care of before you reach retirement and are living on a fixed income.
Look into Different Types of Investments: Know how your savings and pension plan is invested. Learn about investment options and make wise decisions. You may want to put your savings into different types of investments to reduce risk and improve return.
Don’t Touch Retirement Savings: If you withdrawal your retirement savings you will lose principle and interest and maybe even tax benefits. You might have to pay withdrawal penalties as well. If you change jobs make sure to roll over your savings over to a new plan, IRA, or leave savings invested in your current plan.
Put Money into an IRA: You can put up to $5000 a year into an IRA and can contribute even more if you are older than 50. IRAs can provide easy ways to save as you can even set them up to automatically withdrawal from your checking or savings account
Research Social Security Benefits: Social Security pays on average about 40 percent of what you earned before retirement. Make sure you stay on top of receiving these benefits. Check out the answer to How do I apply to receive my social security benefits? to guide you through the process of receiving social security benefits.
Practice Living on a Fixed Income: As you approach retirement, you may want to reduce your discretionary expenses and attempt to live on a fixed income. This practice will help you determine where you need to cut spending and if your assets are earning enough to cover your needs.