Retirement is a time in life that most people look forward to. A retirement pension plan is almost like a reward for decades of hard work. But this doesn’t mean that once you reach retirement age you can just coast into your golden years. If you want to achieve a stable and comfortable retirement, it’s important to have a financial plan.
The choices you make now and in the years to come will have a major effect on your retirement plan, so it’s important to begin thinking about your ultimate retirement goal as soon as possible. A solid plan, with a little flexibility, is a great way to approach retirement. This goes for your financial situation, income, investment options, as well as a variety of other important factors regarding your retirement.
No matter your age, it’s never too soon to begin planning your retirement. What planning looks like though will vary based on how close you are to retiring. One of the most important decisions you’ll make is deciding when you want to retire. According to experts, the age at which you want to retire sets the tone for all of your other plans, especially your retirement income.
Obviously, if you are in your 20s, 30s, or 40s, it’s impossible to narrow down a specific age. But, you can set a retirement goal. You can decide whether you want to work as long as possible or shoot for an early retirement. You can look at where you are right now and decide what you want your life to look like in each of the coming decades. And even though your savings and pension fund can change, you’ll have something to shoot for. To get retirement right, you need to make decisions about your work life and your retirement life and tweak those decisions as time passes.
One of the main goals to set financially is to create flexibility. Nobody knows what the future holds and a lot can affect when you retire. You might plan to work well into your 60s or 70s, but a job loss or health issue could prevent that. Or you might plan to retire as early as possible, but those same factors and others could force you to work longer. Essentially, having multiple plans in place might be the best approach to a retirement plan, especially when you are young.
The most important consideration for people trying to get retirement right is financial planning. When they retire, how they spend their time in retirement, and whether retirement works for them comes down to how much money they have in their retirement account. It’s arguably the most important factor in planning for retirement, so we’ll address it first.
There are a few things to understand about saving for retirement.
The first is the value of compounding interest. In general, what you need to understand about compounding interest is that when you start saving is about as important as how much you save. The longer you save, the more opportunity you’ll have to earn money from your investments.
Not only are you working for your money, your money is working for you.
But how much you save is also important. The key takeaway when it comes to using compounding interest to your advantage is to save as much as you can and start saving it as soon as possible.
What this means specifically varies from person to person, especially when it comes to your age. Most Americans begin saving about 6 percent and increase that gradually as they get older. They top out around 20 percent, which means they are saving about a fifth of what they earn and putting it toward a retirement saving fund in the immediate years leading up to retirement. Specifically, how much you can save is based on IRS rules governing retirement contributions, so if you’d like a more specific breakdown of what you’re eligible to save, it’s a good idea to speak to a financial advisor who can review your situation.
Also keep in mind that your 401(k) or similar retirement savings plan isn’t the only option you have for savings. It might be the most convenient, but you’re better off diversifying as much as possible. Again, a financial advisor can assess your situation and help you determine the best plan.
The other thing you’ll want to consider when it comes to retirement planning is weighing your quality of life now against your quality of life in retirement. Most financial planning experts will advise you to save as much as you can to put toward retirement. But others understand that there are no guarantees regarding the future. If saving for retirement means you won’t get to do any of the things you want to do when you’re younger, you’ll be out of balance.
As nice as it is to assume that retirement gives you tons of time to enjoy everything you want in life, this just isn’t the reality for everyone. You should be smart about saving, but if you’re postponing all of your lavish expenses and experiences only for retirement, you might live to regret it. This is another reason it’s smart to speak to a financial planner. They can help you get retirement right, but also help your strike a balance and embrace what life has to offer in the here and now.
Focus on More than Your Finances
Of course, despite financial planning being the most important part of getting retirement right, it’s not the only thing you need to consider. Having a comprehensive plan for your retirement means you won’t reach the finish line and find your days unfulfilled. You could have more than enough money stocked away for retirement, but if you aren’t sure what to do once you aren’t spending your days working, you aren’t going to feel good about retiring.
What are some of the things you can do to ensure that your retirement is the best that it can possibly be?
Your approach to retirement should be big and bold, especially when you are younger. This helps you put together a plan when you still have plenty of time to get your ducks in a row and make it possible. It also gives you motivation to work toward your goals over the year.
If your plan is to enjoy your retirement traveling the world, helping others, or building a dream home, you need to have a clear picture of the general plan as soon as possible. Your big dreams can evolve over the years, but the more you shoot for the stars, the more you’ll have the motivation to keep going during tough times.
Set Goals and Get Clear on Your Priorities
Once you’re closer to retirement, it’s time to get specific about things. Having clear goals in mind prevents you from feeling directionless.
Most people are surprised to learn that depression, or at least a general feeling of malaise, is common for many people who have reached their destination of retirement. When you’re plugging away at a job you don’t find entirely fulfilling, it can be hard to imagine how having all the time in the world to do as you please could feel anything less than amazing.
But the truth is, many retirees struggle to find meaning in their daily lives. Their families have grown and they no longer have the responsibilities of a job. Having a specific plan in place that’s based on your priorities, is one of the best ways to avoid feeling directionless.
Creating your plan is a different process for everyone, but the important thing is to know what makes you feel fulfilled. For some, that’s spending time with their loved ones. For others, it’s giving back to their community or enjoying an active social life. Many people enjoy a blend of these things.
Now that you’ve reached retirement, your time is your own. Just make sure you set about spending it wisely and do what brings you joy.
Another goal you should have in your retirement is staying as healthy as long as possible. This requires mental and emotional fulfillment, but it’s also important to stay physically active. It’s far too easy once you aren’t rushing off to work each day to not get enough activity.
Now is the time when you can really explore activities you enjoy doing. You aren’t locked into a schedule, so you don’t need to worry about squeezing a workout in the morning before work. Your physical fitness can be a priority and you can maintain it doing activities that you enjoy.
Talk to Loved Ones
You’ve worked hard and you deserve to have the life you want now that you’re retired, but that doesn’t mean you are the only person affected by your retirement. Your closest loved ones, especially your spouse or partner, play a vital role in your retirement. It’s important to talk to these people about your plans.
Your retirement years are an opportunity to control nearly every aspect of your day-to-day life and to build something you love. Let those around you know the role you see them playing and also ask them what they’d like from you now that you have time to give them.
Plan for the Unexpected
Of course, sometimes, it doesn’t matter how much planning you do. Sooner or later, something unexpected is bound to come along. Ideally, it will be a minor bump in the road, but it’s important to have a plan in place for the most common potential eventualities of life.
What will retirement look like if you or your partner is faced with a medical challenge? What if your children experience challenges and need more support than expected later in life? What if things change on a broader scale and it affects your daily life, or you are faced with the challenges of a natural disaster?
You don’t want to dwell on the negative at any point, but especially when you are planning for retirement. But it is important to be practical, anticipate some snags along the way, and put together a plan just in case.
Take an Open-Minded Approach
Part of planning for the unexpected is being open-minded. Not everything is going to go as planned, and in some cases, that’s going to mean better opportunities than if they’d played out exactly as envisioned. Being willing to roll with the punches is one of the best approaches you can take now that you’ve reached retirement.
It’s important to seize the days during your retirement and do your best to live in the moment. As they say, the future is here. All of the planning you did during your career and your middle age was for these moments. If you’ve never been the type to live in the moment, invest time in the practice of being present. The thing that will really help you get retirement right is realizing that all of your hard work has paid off and even if it doesn’t go exactly to plan, you are now free to enjoy your life.
For many, retirement means fewer responsibilities. Your life might not be entirely carefree, but most people have more flexibility than they’ve had since they were kids. Embracing life and growing with the changes that come your way is a great way to make sure you get the most out of retirement.