Do you ever find yourself wondering how much do I need to retire or when to retire?
The thought of retirement is scary for a lot of people, and why wouldn’t it be?
It’s quite natural to worry about money and finances in terms of retirement. No matter how much you earn right now, the thought of retiring one day is enough to drive one crazy with fear.
This thought is the main reason why we always emphasize on pre-retirement planning and financial planning for retirement at an early age.
After all, it’s never too early to start saving for retirement. Not only will it help keep your finances on track, but it will also help alleviate all your retirement-related stress and tension. Most importantly, these savings will come in very handy if you retire early and are unable to work in the future.
The average retirement age is 62, to be precise. Still, many people often decide to leave work between the ages of 55 and 65.
Regardless of when you retire, pre-retirement planning at an early age is extremely vital, and numerous retirement strategies will help you do that.
Preparing for Retirement: Strategies and Programs
If you are worried about retirement, we can give you sound retirement advice on the best retirement plans. There are multiple programs and plans that show how to budget for retirement.
Take a look at a few retirement for dummies options to help secure your future.
Saving for Retirement: 401(k) Retirement Plan
One of the best retirement plans is the 401(k) plan that has long become a popular employer-sponsored retirement plan.
It is a way to save a portion of your salary and turn it into long-term investments through a retirement savings account. All those thinking about “how much do I need to retire” can look into this option. Often, employers may even match your contribution up to a certain amount or limit.
The 401(k) plan is considered a qualified defined-contribution plan, which means that the total amount collected in your savings account depends on your 401k investments and the contributions made to the plan.
401k Investments and Benefits
There are numerous 401k benefits, one of which is that you choose from several investment options. Some of the most common 401k investments and fund options include:
- Index funds
- Mutual funds
- Bond funds
- Small-cap funds
- Large-cap funds
- Foreign funds
Among other 401k benefits is that it is a tax-advantaged retirement plan, which means that if you contribute, your money grows tax-free. You don’t need to pay taxes on the funds in your account until you withdraw it when you retire.
It is another popular type of 401k retirement plan where you are required to pay the tax on your contributions immediately. However, once you retire, you can withdraw all the money from your account without paying further taxes. One thing to remember here for your retirement planning strategy is employer contributions aren’t applicable in the Roth 401k plan.
Contribution Limits for 401k Plan
In 2020, the maximum amount of money that you can contribute to your 401k retirement plan is $19,500. If you are 50 or above, you can make additional contributions that can be up to $6,500. If it’s a joint contribution by you and your employer, the limit is $57,000 and $63,500 for those 50 or above. This is an important consideration when it comes to financial planning for seniors.
Another retirement for dummies plan to consider is your Social Security retirement planning strategy. It’s a program run by the Federal Government that provides you income post-retirement or even if you’re unable to work due to illness or disability. It makes use of taxes that go into a trust fund to help all those who are eligible for social security.
Benefits of Social Security
When preparing for retirement, social security is a great way to secure your future because it offers incredible benefits.
The four key benefits of social security include:
- Disability benefits
- Retirement benefits
- SSI (Supplemental Security Income)
- Benefits for a deceased member’s spouse or survivors
Personal Savings and Investments
Do you have any property on your name or perhaps, money that you invested in stocks or land? If yes, it counts as one of the many credible retirement strategies because these investments are like your savings that would reap high returns when you retire.
Tips on How to Prepare for Retirement: Your Financial Plan
For those wondering about how to budget for retirement, we have a few useful tips that will help you prepare for retirement.
- Know your net worth, which is represented by the following equation: your assets minus your debts. Assets are what you own, and debts are what you owe.
- Maximize your retirement savings account. If your workplace or employer is offering a savings plan, our retirement advice would be to go for it.
- Work with a financial advisor, but someone who is a fee-only Registered Investment Advisor (RIA) because they will always put your interests first.
- Diversify your savings and contribute to different types of retirement accounts.
- Find out hidden investment fees because they can strain your nest egg and make you lose thousands of dollars.
Looking for an Affordable, Easy, Efficient Retirement Option?
Working with a financial advisor is one of the best options to consider when saving for retirement. However, if you are still looking for an affordable, accessible, and efficient financial advisor, you can seek help from a powerful financial tool called Personal Capital. This tool allows you to keep your financial life on track and develop an effective retirement planning strategy.
From budgeting and investments checkup to retirement planner and savings planner, this tool helps you with every little thing related to your retirement plans.
Financial Planning for Seniors: Key Takeaway
We, at The Logic of Money, truly care about your financial situation. Our retirement advice is not to stress how and when to retire; instead, start your retirement preparation early. This action will make your post-retirement life easy, smooth, and free of financial strains.