In a culture of instant gratification, retirement planning is one thing that cannot happen overnight. It takes time, strategy, and years of financial preparation to properly prepare for a financially successful retirement. Explore the importance of retirement planning and how you can start financially planning for retirement today.
7 Strategies For Retirement Planning
The truth is that many Americans are failing to properly prepare for retirement. A survey done by Bankrate using information from the Federal Reserve found that only 16 percent of respondents were saving more than the recommended 15 percent. 21 percent of respondents admitted to saving less than 5 percent of their income. A lack of savings combined with a longer life expectancy means that Americans are shockingly unprepared for retirement. Starting your retirement plan can seem overwhelming, and even impossible given current budgetary restraints. Here are 7 simple ways to start retirement planning today.
1. Properly assess your retirement needs
The first step in planning for anything is to know what it is that you are planning for. What will your retirement look like? Experts estimate that you will need 70 to 90 percent of your pre-retirement income to maintain your current standard of living after retiring. Talk to your family about what you want your retirement to look like. Will you stay in the same house? Will you move to another state? All of these details matter when you shape your retirement plan.
2. Set realistic financial goals
When assessing your retirement and financial planning, be sure your goals are realistic. If you have a mortgage and a car payment and are supporting children and aging parents, think through how much you can really put aside. Don’t be afraid to set a high goal, but make sure it’s attainable or you may become discouraged. If you can not reconcile your retirement desires and your savings plan, you may need to reconsider your retirement plan.
3. Contribute to a retirement savings plan
Be sure you are contributing to a retirement savings plan like a 401(k) or an IRA. Your company may have a retirement plan and they may even match your contributions. Be sure to ask your human resources department about this potential benefit and max out your contributions if possible.
4. Be unwavering in your commitment to saving
Once you have a plan, commit to it! Do not pull any money out of your retirement plan for any reason. This is not an emergency fund. It is your future fund.
5. Consider health insurance and future medical care costs
When creating your health plan, consider what your health insurance will look like after retirement and how much it will cost. Also, consider the cost of senior care. 52 percent of people over the age of 65 will require long-term care at some point in their lives. You may also be called upon to be a caregiver for a loved one – which may mean leaving the workforce early. Be sure your financial plan includes provision for these costs.
6. Learn about tax laws in your state
Does your state tax Social Security? What about pension income? Take a close look at the tax laws for retirees in your state or the state where you wish to retire. Currently, seven states do not tax individual income. They are Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming. States exempting pension income entirely for qualified taxpayers are Alaska, Florida, Illinois, Mississippi, Nevada, New Hampshire, Pennsylvania, South Dakota, Tennessee, Texas, Washington, and Wyoming. States can vary greatly in their tax laws regarding retirees and it is up to you to be sure you are aware of them.
7. Contact a fiduciary financial advisor
When it comes to financial planning, meeting with a fiduciary financial advisor is crucial. Fiduciary financial advisors are set apart from other financial advisors in that they are legally and ethically obligated to put your interests ahead of theirs – even when those interests conflict. They are your best bet to creating a comprehensive and strategic retirement plan that meets your future and current needs.