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People tend to live their day to day lives while ignoring their future. You should hope to have the same current lifestyle during your retirement days. However, that doesn’t come automatically you have to have clear focus on your finances and that includes  having a successful retirement plan.

Retirement planning is a continuous process of setting achievable goals for the future when you want to retire. The plan includes estimating expenses, identifying your sources of income, managing assets, and coming up with a saving plan.

It’s true many people fear retirement because they worry about what happens when their active income from working stops.  However, retirement planning is not rocket science and you can plan for a successful retirement to secure your future if you choose to do so.


Pick a Retirement Age

You are already figuring out how many years you want to work. Determining when to retire tells you how long it will take to save the appropriate amount of money. Once you know how long you want to work, you must decide how much you want to save for your retirement.


Estimate Life Expectancy

Estimating life expectancy is always uncomfortable but it is not something you should ignore.  You need it to know the number of years you should save for because outliving your money is something you definitely want to avoid.


Decide if You are Going to Work After Retirement

You have to consider whether you will continue working after retirement or not.  This is an important consideration because you need to know if your how your retirement will be funded and where the income sources are coming from and whether it will  be active, passive income or combination of both.


Evaluate Your Financial Conditions

First, figure out all current assets, liabilities, income, and expenses. You can sit with a retired planner and estimate your responsibilities and costs. When you retire, some expenses may remain the same.  However, some costs may increase such as health care costs and travel expenses.  Highlight any potential troubles and problems and discuss with a planner.


Estimate How Much to Save

Check how much you need to retire comfortably. Regardless of whether you use one of the standard formulas or specify expenditure estimates, this is a critical step.

Many variables will affect this number:

  • Do you want to continue working part-time or less stressful or demanding work? If you think you will have retirement income, estimate it conservatively.

  • Do you have a pension or 401k from your job that will supplement your income?

  • Are you considering moving to a place with lower cost of living and a calmer lifestyle? Some ideas can be found in our section of the pensioners’ community.

  • Are you willing to trade down to a smaller home to reduce your housing costs? If you have your home for many years, you can even invest capital into your retirement account.

  • Calculate the value of assets and liabilities

Understand the Power of Compound Interest

Understand the power of compound interest and how to use to your advantage.  The compounding interest over the years becomes very significant force. What you need is to be diligence and patient. You only enjoy the benefits of a compound interest after you commit yourself to saving even in hard times.


Know How Much to Save

Don’t confuse yourself here.  Make a list of all things you desire in your lifestyle after you retire. Do you know how much it will cost to retire and live comfortably?

Well, research shows that you need to replace 70-90% of pre-retirement income. Although this is a rough estimate, keep this in mind to get you on the right track.

Plan how much to save monthly based on your earnings per month. Remember you must be committed towards that goal.


Find A Way To Increase Your Savings

Remember even if you had planned on the amount to save, it will never do any harm to over fund. When you clear all debts or your children start supporting themselves, you can add any extra money to the savings and investment plan.

Once your budget is in place, it should be reviewed annually to determine if additions and reductions are changing the budget in any way and, if so, how and what that change does to your retirement planning.


Don’t Withdraw Your Money

Any withdrawal will only reduce the total future nest egg and potential interest on that money. Also, if you are taking funds prematurely from qualified retirement accounts, you will incur penalties and fees on top of the typical taxes.  You are budgeting that money be put away.  When that happens, just forget it even exists.  Hands off until retirement!

Don’t Forget About The Emergency Fund

Let’s face it; there will be unexpected expenses at some point. So its safe to have side savings to help you meet that unexpected expense or obligation when it comes up.

Your emergency fund should be easy to access liquid funds put on hold because you never know the time or situation you might need. The total amount needs to be determined by you and your typical monthly expenses multiplied by the number of months you want o have in secure and in place according to your comfort level.


Evaluate Risk Management

One overlooked area in retirement plans is risk management. People usually focus on saving for retirement. However, they forgot to consider risk management.  Risk management is not only centered around your portfolio but risk management also includes car insurance, house insurance, short/long-term disability, health insurance and life insurance. You need to develop adequate policies for these and should monitor, review and update as needed.


Start Putting Away Money Now

If you start saving for your retirement late, better late than never. The key is always to look forward and never back.  You cannot do anything about what you may not have started but you can do something about actually starting now, today and trying to develop a plan of action based on the current conditions going forward.

If you plan to improve your standard of living and maintain a financial position for a long time, it is always good to invest in yourself. 

Create a diversified savings account, investment, stock, bond, property, and insurance portfolio to help create protection, growth and diversification to cover all your bases.  Having everything covered decreases the possibility that an event will devastate your retirement plan or expected standard of living.


Develop Strategies To Maximize Social Security Income

Social security may still be an essential part of your retirement plan, so maximizing this benefit is critical.

You should extend the age at which you will start making withdrawals. Also, the longer you wait, the bigger the monthly payment. If you wait until the age of 70, your payment will increase dramatically over 62 but you also have to consider life expectancy in the equation so look at the total picture and do what is best for your situation.


Review And Revise Your Plan Often

Remember to focus on your savings and try to review and find additional ways to save. Check your retirement plan every year to see how things are going and make adjustments as necessary.  All you need is prepare and stay organized through the process.

Retirement is a life transition process. Like other major life transitions, retirement requires you to adapt and grow.  Retirement cannot succeed overnight and requires in-depth planning and preparation. Depending on your interests, activities, expected standard of living  and health, your retirement plan needs to cover many areas of your retirement.  

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