Whether you own your own business or work for another company, it is important to prepare for retirement in order to maintain your financial freedom. Not enough people start preparing for retirement early, and that can mean a diminished quality of life after you stop working. I was lucky enough to be raised in a family that valued saving, and taught me from a young age, but it was STILL incredibly intimidating to me as an adult. But if you want to keep living your best life, even after retirement, then you need to start planning now.
Saving
One of the biggest ways that you can prepare for retirement is to start saving. If you aren’t already saving, then it is important to start right away. If you are already saving, then keeping going! Starting small is better than not starting at all, so whatever you can is enough for right now. Developing the habit of saving either a certain amount or a set percentage of your income will help you to increase that amount later.
The sooner you start saving, the more time your money has to grow. You should review your budget to set an amount to save each month that will not strain your finances and then stick to that goal!
Know Your Needs
While it is important to save money, it is also important to know what your needs will be during retirement. Retirement may be more expensive than you realize. You will need about 70-90% of your current salary in order to live comfortably in retirement. Planning now can make the difference between living comfortably and not having enough. You may also need to account for increased medical expenses or homecare assistance.
Use Employer’s Retirement Plans
If your current employer has a retirement plan, like a 401(k), then you should sign up and contribute to it regularly. Saving this way will help your taxes to be lower, and your employer will probably contribute to it as well. You can also set up automatic deductions, so it is easy to contribute to it each paycheck.
Don’t Touch It!
Once you start saving for retirement, it is important to leave it alone. If you withdraw from it, then you lose principal and the interest you may have gotten on that principal. You may also lose tax benefits or have to pay fees for withdrawing early. If you change your job, you have the option to leave what you have invested in the current plan, or you can roll them over to a new plan with a different employer.
Individual Retirement Accounts
In addition to having a retirement plan through your work, you should also start contributing to an Individual Retirement Account (IRA). An IRA allows you to contribute $6,000 a year, and that number increases as you get older. IRAs provide tax advantages for saving towards retirement that you don’t get with a regular savings account.
Social Security Benefits
You should also factor in Social Security benefits when planning for retirement. These benefits should replace about 40% of your median income after you retire. There are ways that you can calculate this online that will give you a better idea of what to expect.
P.S. This post is a partner collaboration.
