For most of us, retirement is an aspiration. You worked hard (hopefully at a job you at least somewhat enjoy). Perhaps you raised kids. As you enter your older years, the hope is that you won’t have to work anymore and can enjoy life. And yet, for more and more Americans, the dream of a full retirement has become increasingly far-fetched. Is all hope lost? Follow our tips below for retirement income planning!
The first step for retirement income planning, as with any plan, is to figure out what you want life to look like once you stop working. Do you plan to live in the same house? Would you like to travel the country in an RV? Maybe you’d like to downsize to a smaller home, or live in a retirement community. No matter what your aspirations are, figure out your concrete plan. Have fun with this, but also be realistic. If you aren’t a billionaire, cruising on your yacht around the world every year is probably not an achievable goal.
As an added aspect of this, take into account inflation. We all know inflation has been on the rise. Under normal circumstances, the Fed’s average is around 2% per year. This is not a bad place to start when making your calculations. Once you know what your life plans are, begin calculating how much money you will need to achieve that, then factor in increases in cost due to inflation. This might seem like a lot, but don’t forget that many costs you currently have may no longer be a factor (childcare, for example).
A large portion of your retirement income planning will be dependent on how old you are now. If you are in your twenties, single, and have very few obligations, you may be able to put aside a large quantity of money. Do it! Many people struggle to save for retirement as they get older, own a house, and have children. If you can start when you are young, it will only make it easier as you get older.
Any financial expert will recommend you have a budget, and with good reason. Having a budget helps us to be more mindful of our financial situation, no matter the goal. Obviously, having and sticking to a budget is critical to any financial planning. Without a budget, most people tend to spend what they have.
One thing that helps many with budgeting is setting up automatic payments. This way, you don’t need to worry about remembering payments, or being tempted to shift money around.
It’s always a good idea to have a separate emergency account. Establishing one will prevent you from dipping into your retirement savings in the event of a financial emergency. It may be a good idea to establish an emergency bank account first, and then begin saving up for retirement.
For all of your financial needs, whether retirement income planning or tax preparation, reach out to Sheffield, Trackwell and Rapp. Our team is ready to assist you with all your financial planning!
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