Retirement planning is an important aspect of a happy and fulfilled life, yet many people don’t do any preparation until they realize it’s too late. Here are five tips you can use when planning for your retirement in 2022.
1. Know when to start planning your retirement
First and foremost, know when to start planning for your retirement. If you’ve spent many years working but have not yet started to plan for retirement, now is the time. As a general rule of thumb, you should save at least 10% of your income each year before you retire.
The sooner you start saving, the better off you’ll be in the long run. The real benefit comes from compounding interest; the longer your money sits in a savings account or investment before it starts earning interest on its own, the more valuable that money will become to you over time.
2. Determine how much money you’ll need to retire
Consider the lifestyle you want in retirement. Will you be taking long vacations? Eating out regularly? Purchasing a boat or airplane for personal use? All of these things need to be planned well in advance of your retirement.
Also, be sure to consider how long you will live. Currently, a 65-year-old has an average life expectancy of nearly 85 years. If you’re married, think about your spouse’s age as well.
One spouse may need care in their 90s while the other lives into their 100s. The cost-of-living increases and inflation are also factors to take into account over the coming decades.
It’s important to begin working toward your retirement goals as soon as possible: saving up money now is your best bet for living comfortably later on.
3. Make your financial goals a priority
The first step to creating a good retirement plan is to set some financial goals. A financial goal is a long-term target you set in order to improve your financial situation, for example, determining how much money you need to save for retirement or how much money you want to contribute to an emergency fund.
Having clear, written goals can help you make decisions faster and easier because they give you something concrete to work toward. They also make it easier for you and your spouse (if applicable) to stay on the same page financially because everyone involved knows what’s going on and what needs to be done.
4. Choose a retirement plan that works for you
Before you can create a retirement plan, you first need to determine how involved you want to be in choosing your investments. If you’re comfortable picking and managing your own, a Roth IRA may be right for you. However, if you’d rather have a professional do it, or are just too busy, choose a 401(k) or traditional IRA instead.
If you’re unsure about the tax implications of your choice now and in the future (those taxes will be due when you withdraw), consider opening both types of IRAs, as well as a 401(k), if your employer offers it. That will give you more options down the road.
5. Ensure you have optimal retirement investments
You can invest in your retirement through several different types of accounts, including Traditional and Roth IRAs, Health Savings Accounts (HSAs), and 401(k)s. Within these various account types, you can choose from a number of investment options, such as stocks or bonds.
Your best bet is to diversify the investments across each account type and the different options within each type. This strategy will help protect you. If one investment takes a dive, your other holdings will likely offset any losses.
It’s never too soon to start planning for the future!
The most successful retirees are those who have invested in their retirement long before they reach that stage in life. Equally important to the planning itself is starting to do it early on in your career, if not sooner.
It’s easy to feel like there are too many competing demands on your money and attention, but it’s critical that you make room for retirement, even if it means at least temporarily forgoing other goals or luxuries.
There are many different ways people choose to invest their money over time so that they’re financially secure as retirees. Some prefer mutual funds while others favor individual stocks; some opt for bonds while others insist on diversified portfolios containing a bit of everything.
Regardless of which method you choose, by following the advice in this article, you’ll be able to create a retirement plan that will work for you, ensuring your retirement years are peaceful and prosperous.
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