Creating Your Retirement Strategy
Planning for retirement well in advance will set you up for enjoyable golden years that you worked hard for. There are several things you can do to set yourself up for success. Let’s go over them.
Decide How Much You’d Like to Save
To begin with, knowing how much money you’d like to have saved up for retirement gives you a goal amount to keep in mind. Ultimately, knowing your goal will make it easier to determine how you will reach it. You’ll be able to assess your current financial situation and create a plan to save for retirement.
While assessing your current financial situation, it could be helpful to look at things like current savings, mortgage or rent, property and other tax obligations, healthcare, and average living expenses. Knowing how much you currently earn, spend, and have saved will give you a better idea of how much you will have saved up each year.
You can always work with a financial advisor to help keep you on track and understand where your retirement savings stand. A financial advisor will be able to help you make necessary adjustments to your savings throughout your journey.
Retirement Account Types
There are several different types of retirement accounts. An individual retirement account (IRA) allows you to invest funds for your retirement. You are required to start taking money out of an IRA when you turn 72 years old. You can either make contributions tax-free with a traditional IRA or receive your distribution tax-free with a Roth IRA.
A 401(k) is another great retirement account option that employers offer their employees. A percentage of their paycheck automatically goes into their 401(k), and a lot of employers will match contributions up to a certain percentage. If your employer matches up to 6%, you’ll want to be putting in 6% each paycheck to take full advantage of your employer’s match.
There are other sources of income that you may benefit from. The government offers Social Security payments. Once you turn 62 years old, you can access funds from Social Security.
Another option is a health savings account (HSA). These are typically used like traditional retirement accounts and offer options, such as money market funds or self-directed accounts for mutual funds. With an HSA, you can put money in tax-free, earn tax-free interest, and take money out tax-free for medical expenses.
Retirement Savings in Your 20s
Many people start building their retirement savings in their 20s. This is typically when people get their first “grown-up” job and can benefit from employer matches. In your 20s, you can start building an emergency fund. With this in mind, you should aim to have three to six months of your basic expenses in your emergency fund. Near the end of your 20s, you should aim to have at least the amount of your yearly salary in your retirement account.
Retirement Savings in Your 30s
In your 30s, you’ll start to see your retirement accounts really take shape and grow. Near the end of this decade, it is good to have about three times your salary saved.
Retirement Savings in Your 40s
In your 40s, you’ll probably start focusing on long-term planning. Additionally, you’ll be more focused on your income and thinking of ways you can make the most of your retirement planning. You should avoid taking on a lot of new debt during your 40s and focus on saving. You’ll want to aim to have about four times your salary saved by the end of your 40s.
Retirement Savings in Your 50s
Your 50s will be all about saving and cutting down expenses. Many people downsize their home or even pay off their mortgage in their 50s. With kids out of the house, you can see a decrease in everyday spendings as well, with less mouths to feed and less hobbies to pay for. By the end of your 50s, you’ll want around eight times your salary saved.
Retirement Savings in Your 60s
You can practically smell retirement once you reach your 60s. You’ll need to decide when you want to start receiving Social Security payments. You should also take a look at your income, expenses, and debt and make a plan on how you’d like to approach retirement. You’ll want about ten times your salary saved at the end of your 60s.
Retirement Savings in your 70s
Hopefully by your 70s you’re enjoying your time doing whatever it is you dreamed your retirement would look like. It’s time to enjoy this life to the fullest because you worked so hard for it. You can still maintain active investments to make sure there is also some money coming in during your golden years. Check your account to make sure you’re on track and spending wisely.