It’s never too early to start planning for retirement. By planning accordingly and avoiding common mistakes people make with their money, you could set the foundation for your retirement as early as your 20s or 30s. Use some of the following tips from Bnews9 to get started on the right path.
Plan Your Needs
Experts say you need about 80% of your pre-retirement income to retain your standard of living during retirement. You can source your money from Social Security benefits, pensions, contribution plans, savings accounts, or other investments, so you’ll need to know what sources are available to you and how much you’ll need in total in order to properly plan. Most workers get their retirement benefits from a mix of Social Security and job-related plans, so it might be worth starting there.
Save Your Money
The earlier you start saving, the better, especially if you use taxable savings accounts or an IRA that can make your money grow. Opting for automated savings, either through bank account transfers or paycheck withholding, can make saving for retirement hassle-free. However, before you can begin to save money, you need to track your spending, which includes both recurring charges and miscellaneous purchases. You can make a retirement budget by listing out those expenses and allotting cash for any future lifestyle changes, such as increased travel during retirement. If possible, take a few months to actually test out your budget while still working to see if it’s feasible.
Don’t wait to invest until you have built up enough savings. A few extra years could potentially add tens of thousands of dollars to your retirement fund. Plus, starting earlier gives you more time to learn the ropes and reduce risk. To start, try options that are high-yield and low-risk as you figure out what works best for you.
Calculate Your Assets
A highly valued asset can help bring in a lot of money. Take your home, for example. If you’re looking to downsize after retirement, you’ll need to know your home equity to sell your home. Home equity is the market value of your home minus the remaining balance on your mortgage. You could access your equity with refinances, home equity loans, or specialized investments for quick financing.
Also, here’s a quick tip: since you’ll be working with a lot of different documents, it’s worth taking the time to learn how to merge PDF files so that you can have all your financial planning documents in one place.
Find the Right Job
Does your job offer retirement benefits? If so, take advantage of them. Some employers will offer 401(k) plans, employee stock plans, pensions, life insurance, and more. Starting a 401(k) early, for example, will save you money on taxes every year, increase the amount your employer matches, and increase how much you accrue based on your compound interest rate. Speak with your human resources department to see if you’re eligible for any plans and figure out how much you need to set aside to get the full employer contribution.
Write Your Will
It may seem too early to start your will, but it’s an important step in estate planning, especially if you have large assets like a house or a business. A will can dictate how you want your assets to be handled after death, which is especially important if you have children, a spouse, or other beneficiaries. Wills can be updated over time, so as you get older, make sure you account for everything.
You can prepare for your future with baby steps: incremental planning, establishing good saving habits, and making your money work for you. Getting a head start on retirement decades in advance will ensure you live more comfortably when you’re ready to settle down.