For many of us, the fear of death is one of our greatest fears.
And for many others, their greatest fear is what comes before that – retirement. But that specific fear can be mitigated by being proactive and taking control of your retirement planning!
Do you need some help figuring out how to plan for your future? If you keep reading, our financial planning tips will help you get there.
1. Understand and Calculate Your Government Benefits
Most countries have some form of social security, pensions, or a similar fund where a portion of an employee’s wages is deducted from their pay in order to help provide for their future retirement.
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If you are in the U.S., you can visit the Social Security site, register for free, and see an estimate of what your benefits will be based on your retirement age.
In the U.K., you pay into the National Insurance (NI) fund. This is the U.K. equivalent of social security. Similar to the U.S.’s Social Security site, you can visit the NI site and see and manage your credits.
While government benefits aren’t enough to cover most people’s full retirement, they still make up a portion of most people’s retirement plans.
2. Have a Goal
If you want to know how to retire, you have to know how you want to retire.
That means setting a goal for your overall retirement savings.
But how do you determine what your goal should be?
Generally speaking, you are going to need less income in retirement in order to maintain your lifestyle. You can use a retirement calculator to determine how much you need to save for retirement, as well as how much you can withdraw in retirement.
When thinking of how much you need, you should anticipate:
- Medical expenses
- Mortgage or rent
- Travel costs and vacations
- Discretionary expenses
- One time big expenses, such as paying for a child’s wedding
This is in addition to regular expenses such as utilities and groceries.
If you’re not sure what your goal should be, consider consulting a professional financial advisor. Look for one that knows the specifics of your country. For example, if you are in the U.K., Consilium can help you with financial planning.
3. Start Saving Towards Your Goal
Now that you have a goal, it’s time to start working towards it.
If you haven’t started saving yet, it’s time to start. The sooner, the better.
If you’re already saving, keep at it. If you want to increase your savings, look at areas of your life you can cut back on, and put that extra money in a retirement savings account.
No matter what, try not to touch your retirement savings until retirement. Withdrawing early means cutting into your principle – and also any interest.
4. Pay off Debts
Start by paying off high-interest debt like credit cards, personal loans, and auto loans. These debts offer no tax benefits, and can quickly burn through cash savings.
While it’s not uncommon for many retirees to carry a mortgage into their retirement, it’s better if you can pay it off ahead of time and enter retirement mortgage-free.
5. Build an Emergency Fund
Along with saving in a retirement plan, you need to build an emergency fund. Aim for at least 12 months’ worth of savings.
When an unexpected financial crisis comes up, you can delve into your emergency fund and save your other accounts for your regular retirement expenses.
Follow These Financial Planning Tips for a Comfortable Retirement
If you follow these financial planning tips, your retirement can be a comfortable one. Don’t be afraid to seek out financial planning advice, or get your own hands dirty and learn how to manage finances for retirement planning.
For similar advice, check out the Finance section on our site.