Have you found yourself thinking about retirement more and more, with little idea about how to prepare or get started? Retirement is something we all must face at some point, but shockingly little is done to prepare people in their youths to plan for their financial security later in life.
Fortunately, there is much you can do to educate yourself on the manner. First, you must understand what exactly your retirement savings should be and what they are used for. Then you must put together a solid plan for your later-in-life finances. We’ve compiled here an easy to understand guide covering all the subjects you will need to know, to set you on the right path. With a bit of know how, the topic will become less intimidating and help you feel like the master of your own fate that you are.
What Retirement Funds Are For
It may seem obvious, but not everyone understands exactly what a good retirement plan is for. Put simply, the money you set aside for retirement is meant to see you through when the time comes to stop working.
Some of us stop working later in life because we have less energy or our health is failing, or maybe just because our age is catching up to us. When this time comes, knowing you have the money in place to stop working while still being able to cover your living costs, healthcare costs, with some left over for travel and leisure, will be a real relief. Of course, how much money you will need will differ from person to person, so it is key to figure out exactly what that final tally should be. This is a topic we will cover extensively in the next section.
How To Get Started
So how much money do you need exactly? The answer will change depending on the individual, as previously mentioned, but there are some good ways to figure out your needed total. In fact, there are even formulas set up, easy to find online, that allow you to fill in your current expenses and salary and come up with a total amount of money you will need to retire [1]. This strategy is useful because it takes into account how you currently spend your money and assumes your habits will stay the same even into retirement age. In this way, you aren’t being compared to individuals who are more spendy than you or those who are more frugal.
It’s important to come up with a sum that is accurate to how you truly live your life, so that you come up with a savings goal that will actually serve you well later in life. Of course, if you want to take it a step further, you can even consult with a financial advisor to come up with an accurate savings goal. Whether you determine the final number on your own or with professional help, getting to this number is an important first step.
The Path Moving Forward
Now you know how much you need to save to get to retirement. So what next? You must put together a plan to get you to that number of course. One easy way to do this is to take that final number, figure out how many more years you want to work until retirement, and then divide the first number by the second. This will tell you how much you will need to set aside a year. You can then divide that number down by 12 to figure out how much to save a month, or divide it by 52 to figure out how much to save each week. It all depends on your preference and how comfortable you are dealing with retirement funds on a weekly, monthly or yearly basis.
Making Your Money Work For You
What we’ve outlined above is a good set of retirement basics, but it is important to also spare a moment to talk about the concept of making your money work for you. This means taking the money you have saved and doing something with it that makes it grow. This is an especially important concept when you consider the fact that thanks to inflation, a dollar today will be worth less than a dollar in ten years [2]. Having funds set aside that accrue money will help combat the problem of inflation and rising costs. One good way to do this is to contribute to your employer’s retirement fund, likely through a 401k. An income property is also a good alternative, as are any other investments that are likely to gain you a good return on investment. And of course the stock market is one common way many people help their retirement money go further. Just make sure you know what you are doing. Educate yourself on what stock market investments you are making, and remember one key rule: more risky stocks when you are younger, and more conservative stocks when you are older.
Taking This Know How And Moving Forward
Now that you understand the topic of retirement savings better, it is time to move forward. After all, what good is a sound plan if it isn’t actually put into place and followed successfully? Understand what amount you are aiming for and how to set it aside, and figure out how to make the funds you have actually work for you. Then, don’t dawdle. There is no time like the present to get started, no matter how far away you think you are from retirement. A little time and energy today can save you big in the future. By getting your retirement plan underway today, you are taking a major step toward a comfortable life in your golden years. Take the reins, your future self is sure to thank you when it comes time for a slower pace of life!
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