Plan for Retirement

Plan for retirement when you first enter the workforce to ensure you will have enough saved to live comfortably when you enter the active retirement stage. Starting a 401(k) at your very first job is the ideal, but many people nearing retirement now did not have that option or the foresight to take advantage of it. People planning to retire before they turn 70 should start saving no later than in their 30s. Pushing off your plan for retirement could mean that you will be working longer or living on a tighter budget once you retire.

A plan for retirement usually includes some combination of personal investments like stocks and CDs, employer-sponsored programs like 401(k) or pensions and government-sponsored programs like Social Security and military retired pay. There are endless options for investment vehicles and savings strategies, so people can plan for retirement in a way that makes them comfortable. The stock market isn't for everyone: it's high-stakes nature makes conservative investors nervous, and people within 10 years of retirement stand to lose it all. A financial advisor will help you weigh all your options to find a strategy that will provide you with the income you need for your retired years.

Steps Toward Planning

Half of Americans today do not know how much they need to retire. Without a goal in mind, it is impossible to come up with a workable plan for retirement that will provide for your expenses when you stop working. The average American spends 20 years retired, but that number is creeping upward as life expectancy increases. Young people are faced with the prospects of either working 10 years longer, saving more though many are making less or lowering their expectations for their retired lifestyle. None of these is particularly appealing, so start developing a plan for retirement today that assumes a long life and reasonable income expectations.

Budgets are strained everywhere, and many people cut retirement savings first when money gets tight. Even in the toughest times, do what you can to save away even a pittance of your earnings. Your money will grow over time, no matter how small your contributions, but putting in nothing will gain you nothing. Make saving a priority, just like groceries and utilities, and increase your savings activity as soon as your finances start to recover.

To plan adequately, you must know your retired needs. Retirement calculators are easy to find online, and your financial advisor will help determine how much you should save. Your needs include living expenses, medical costs and money for leisure activities like traveling, multiplied by your life expectancy. That sum is weighed against your expected retired income from Social Security and pensions. The difference is how much you need to save to reach your goals.

Get enrolled in an employer-sponsored savings plan as soon as you start working, and find out if your company has a pension plan. Great retirement benefits are as good as an extra paycheck, so seek out jobs that offer such programs. If you are thinking of changing jobs, find out what will happen to your pension. You would hate to lose your benefits after years of service to a company, just to start from scratch.

A solid plan for retirement means understanding basic investment principles. Investments with the highest returns carry the highest risk, and conservative investments usually do not offer much in the way of growth. Balancing your risk and gains potential is key to your plan. Young workers with decades ahead of them should diversify their portfolios with a substantial proportion of savings in risky investments like stocks. As they get closer to retiring, workers should dial back their portfolios toward more conservative vehicles to ensure that money is safe when they are ready to tap it.

Over the course of your plan, never touch your savings. Doing so usually carries steep penalties, and it can derail your entire plan for retirement. Set up a separate emergency fund to protect your retired savings, and even consider investing that money in non-liquid vehicles if you are prone to temptation. You should also consult your financial advisor about your Social Security benefits. You have the option to withdraw early, but doing so decreases how much you will receive over your lifetime.

Workers of any age should begin an Individual Retirement Account, or IRA. This is an easy plan to save, and you can set up automatic debits from your checking or savings account for consistent contributions. Account holders can contribute $5,000 annually, and more once they turn 50. Many other savings vehicles can be rolled into your IRA as well, and IRAs carry tax benefits. A good plan for retirement incorporates several of these options, so speak with your financial advisor to get started today.

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