Retirement is a huge milestone, and it’s important to make sure that you have all your ducks in a row before taking the plunge. Here are 5 key things that you need to do to ensure that your retirement is as stress-free and enjoyable as possible!
Establish a Retirement Budget: Determine Your Expenses and Income
Creating a budget for happy days is important to ensure you are living within your means. Your expenses will change from your pre-retirement lifestyle. It can often be less, but there may also be unexpected needs that arise during retirement such as healthcare costs or travel. Therefore, knowing exactly how much money you will need to cover your expenses every month is essential.
It’s important to understand your sources of income when you stop working, such as Social Security, pensions, investments and other savings accounts that were built up prior to retirement. Also take into account any additional income you may bring in from part-time jobs or other sources of income. This step helps you determine exactly how much money you will have access to on a monthly basis so that you can create a realistic budget that covers all of your necessary expenses.
Start Saving and Investing Early: Make the Most of Compound Interest
As early as possible, start building a nest egg with regular savings and investment. The single most important factor in creating a secure retirement is compound interest – interest earned on your interest. Even small amounts of money invested early can grow significantly over time, so it pays to save and invest even when you’re starting out. Especially for younger workers, contributing a percentage of every paycheck to a 401k or IRA can have a major impact on your savings.
If you wait until much later in life to start saving, you may not be able to make up lost ground by the time you need it. It’s never too late to start saving but the sooner you do, the better chance you’ll have at securing your future financial needs. Look into employer-sponsored retirement plans such as 401(k)s and check with an accountant or financial advisor about other types of investments that might be right for you.
Review Your Benefits: Social Security, Pension, and 401(k)
Before making retirement plans, review your Social Security retirement benefits and any pension, 401(k), or other retirement accounts that you currently hold. This may require some research on your part to ensure that you understand the rules that govern each type of plan, as well as strategies for using each of them to maximize your income in retirement.
With regard to Social Security, it is important to understand when it makes sense for you to start receiving benefits (at age 62, full retirement age, or later) and how much money you can receive from the system. With pension and 401(k) plans, familiarize yourself with the withdrawals or other methods of accessing your funds. Additionally, take stock of any additional stocks or bonds held in taxable accounts and rate them based on potential risk and return in order to make informed decisions as you transition into retirement.
The 401k is a great savings plan for those who are looking to save for their future, but it is not the only option. The IRA is another solid choice that can provide you with the funds you need when you stop working. Both options have their pros and cons, so it is important to understand the difference between the two before making a decision. When looking at the comparison of ira vs 401k, the biggest difference between the two is how they are taxed.
With a 401k, contributions are made with pre-tax dollars, which means they are subject to income taxes when withdrawals are taken in retirement. With an IRA, contributions can be made with either pre-tax or after-tax dollars (Roth IRA). This means that withdrawals from a Roth IRA are not subject to income taxes, providing tax-free growth on investments.
Create a Bucket List: Travel, Hobbies, and Other Activities
Retirement is a great time to enjoy travel and explore hobbies, activities, and experiences that you might not have been able to do while employed. Before you retire, it’s important that you create a list of these things that you’d like to pursue. This bucket list should include the places you dream of seeing, the activities you want to try, and any other endeavors that will bring joy and a sense of accomplishment.
When creating your list, think about what hobbies or interests have always been on your wishlist but may have gotten put on the back-burner due to lack of time or resources. Now is your chance to explore those passions! You can also consider life milestones like an overseas trip with family or friends, taking up a new sport or volunteering abroad. Adding items to the list will help give you a structure and purpose as well as provide milestones for your retirement journey that can be added over time.
When creating this retirement bucket list, make sure it’s realistic while still allowing enough room for adventure. Consider the cost associated with each endeavor as this may dictate when and if it gets moved forward in the timeline for completion. Take into account any limitations or health concerns so that you can plan appropriately — this is especially true when travelling abroad or considering any strenuous activity like rock climbing or skydiving!
With all these things in mind, part of the joy in developing your bucket list will be revisiting places and ideas from earlier in life; introducing grandkids to once favorite spots; snorkeling around exotic locations; taking adulthood classes just for fun; learning how to play an instrument at last! Creating a bucket list makes retirement planning exciting as it gives purpose and direction in what can otherwise be a difficult transition period. So get out there and start planning those bucket list items now — happy retiring!
Prepare a Retirement Roadmap: Set Goals and Make Adjustments Along the Way
An early start is the key to retirement success. Preparing for retirement should begin as soon as you start working. Create a retirement roadmap with achievable goals and milestones so that you can track your progress and make any necessary adjustments along the way.
Your roadmap should consider current and future income sources, essential expenses, amount of money needed for lifestyle costs, inflation rates and health care costs. If possible, try to save 20 percent of your income each month for retired living expenses. In addition to savings, look into appropriate investment options for your retirement funds. These could include tax-advantaged instruments like IRAs, 401(k)s, annuities and Roth IRAs.
When setting goals on your roadmap, update them regularly, taking into account any changes in circumstances such as marriage or parenting, medical issues or job losses. This will ensure that you’re creating a realistic plan while looking ahead toward the future. Keep up with relevant laws and regulations that affect retirement such as Social Security or Medicare so you can make sure your finances are in order before you decide to retire.