Planning for a Comfortable Retirement

Planning for a Comfortable Retirement

Planning your retirement is a long-term process. You want to make sure you plan ahead so that you are able to retire in comfort. Taking the time to plan before you start reaching retirement age will help you avoid uncomfortable financial challenges as you get older. How Much Do You Need? The amount of money

Planning your retirement is a long-term process. You want to make sure you plan ahead so that you are able to retire in comfort. Taking the time to plan before you start reaching retirement age will help you avoid uncomfortable financial challenges as you get older.

How Much Do You Need?

The amount of money you need in retirement depends on your lifestyle and your plans after retirement. If you plan to maintain a similar lifestyle, then you want enough income from your retirement accounts to cover the costs of your lifestyle.

A general rule of thumb for your retirement income is roughly 70 percent of your current income. That will allow you to manage any bills and costs associated with your normal activities. It may also allow you to enjoy more travel and other activities if you have paid off your home and do not have any debts by the time you reach retirement.

Start Saving Early

The foundation of planning for retirement is when you start saving your money. You want to start saving at a young age to increase the chances of reaching your retirement goals. Start a 401(k) plan through your employer or set up an IRA to put aside funds for your retirement.

In most cases, you want to save 10 to 20 percent of your income. By putting the money into a retirement account and investing the funds, you have a lower risk of harming your long-term plans.

Keep Money Aside in Cash

A big drain on your long-term retirement plans is taking money out of your retirement accounts. There are two problems with taking out the money before you reach retirement age: you will pay fees on the funds you take out and you spend the money on items in your life.

Avoid the risk by keeping money aside in cash. Build up a fund for emergencies and unexpected problems. You want to have enough in a basic savings account that you can access in an emergency to cover roughly six months of your living expenses. By having a reasonable rainy day fund, you will not face financial problems when an emergency occurs or when unexpected expenses arise. You will have the funds set aside to avoid borrowing from your retirement accounts.

Rebalance Your Portfolio

Rebalancing a portfolio means you look at your investments each year and check that it is still appropriate for your needs. As you get older, you will want to shift the balance of your portfolio to reduce your risks and still make a reasonable return on your investments.

It also allows you to adjust for any significant changes based on market conditions. If one investment increased significantly, then you may have more of a single investment than you want. A diverse portfolio reduces your risk and helps you stay on track to meet your retirement goals.

Focus On Your Risk Tolerance

Risk tolerance refers to the amount of risk you feel comfortable with in your investments. It is important to invest the money in your 401(k), IRA or any other retirement account. The investment helps your money grow and keeps up with inflation. The problem is that you may not feel comfortable with a high risk portfolio.

The ideal portfolio focuses on your goals without taking on more risk than you feel comfortable handling each year. A high risk portfolio means you have more stocks and will make a higher potential return. The downside is that you also have a risk for large losses. A lower risk portfolio includes bonds and other investment classes to reduce your risk and reduce the potential for large losses. You want a balance of equity, bonds and other investments to help maintain your long-term goals.

Plan for Decades

Retirement does not look the same in modern life. Advances in medicine and treatment mean you will live longer than previous generations when you are ready to retire. That may mean you have 30 years or more after you retire.

You want to plan for a long-term retirement so that you age with dignity and grace. Plan to live a long life and make sure you have enough to handle the increasing medical costs as you get older. Do not assume that you will only need enough funds for 10 to 15 years. Expect to live at least 30 to 40 years after retirement to ensure that you have enough to retire with dignity.

Planning for a comfortable retirement is a process. It takes time and you will want to make sure you have the right strategy to reach your goals. By starting the process early and putting money into retirement accounts each year, you will reach your goals and have enough to feel comfortable for your life after retirement.

 

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