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Tips for Retiring Comfortably

Posted June 21, 2012 by EasyFinance.com to default 5 0

How much money will you need to set aside for your retirement? Of course, there is no simple answer to that question. The amount you may need to retire comfortably and live a full, rewarding lifestyle depends on quite a few different factors. Of course, it is not difficult to find enthusiastic and opinionated advice on the subject at nearly every turn, some of which will be more worthwhile than others. Keeping certain considerations in mind while evaluating this advice can be particularly important to achieve a comfortable retirement.

First of all, rising government debt, along with the fact that people now tend to live longer after retirement due to medical advances, could well pressure the pension age to increase to seventy or even older. The idea of the aging Wal-Mart greeter may become all too common as senior citizens are forced to return to work to supplement insufficient retirement savings. This Social Security gap means that many people’s dreams of the perfect retirement could be delayed or completely destroyed according to NIESR, the National Institute for Economic and Social Research.

Too many individuals wait until the last minute to make important retirement preparations. Even those who do begin at a young age frequently fail to think about vital points such as inflation, currency valuation, tax law changes and the like. Since virtually all potential retirees would prefer to never have to work again for financial reasons after retirement, it goes without saying that taking the time to create a thorough retirement plan is just as sensible as creating a business plan before launching a new business. In addition, lengthened average lifespans also mean that there is always the risk that people will outlive the savings they have set aside for after their retirement. Therefore, you should ensure that your retirement plan allows for this possibility.

Ideally, you should begin planning for your retirement from your first day of working a full-time job. Once upon a time, it was quite common for a person to spend his or her entire career with one company. Now, individuals are lucky if they are at the same job for more than five years. In today’s world, job commitment from employers and employees alike seems to be a thing of the past. Is it true that this unpredictability can make retirement planning difficult; still, some planning is better than no planning at all. Those who save effectively to fund their retirement plans will still be able to enjoy a comfortable lifestyle during their retirement years. Of course, you should also manage your expectations throughout the saving process. A rise one month in the stock market is no guarantee of what will happen tomorrow; for example, the recent economic turbulence has caused many people’s fund values and annuity yields to decrease significantly.

However, a balanced and prudent retirement strategy is important regardless of economic ups and downs. Creating this type of strategy can be difficult on your own, so many people choose to rely on a trained financial advisor to reach their retirement goals. Your bank can connect you with this type of advisor. Although the strategy you and your advisor create will determine many of the specifics of your retirement savings, a number of pre-retirement habits will help virtually anyone build up a comfortable retirement nest egg.

Save at least 15 percent of what you earn each month.

Although the total amount of money necessary for retirement can vary widely from person to person, a good rule of thumb if you wish to be able to maintain roughly the lifestyle to which you are accustomed is to start saving at least 15 percent of your income every month if you are younger than 40. People who wait until after age 40 will likely need to save a larger percentage each month.

Maximize your contributions to your employer’s pension plan.

Many employers will partially or completely match every dollar you put towards their pension plan. Contributing at least as much to the plan as the company will match is one of the easiest ways to maximize the return on your retirement savings.

Utilize a basic retirement withdrawal calculator.

For most people, a pension, IRA, 401K, annuity and other forms of investments will be vital sources of income after retirement. Take the time to evaluate exactly how much each of these investments will produce for you during your retirement years. Utilizing a basic retirement withdrawal calculator can then help you determine how long your money will last after you stop working. While making your calculations, remember to include the most realistic possible estimates for inflation, tax expense, money you leave to your family and contributions to children's college costs, as well as for the appreciation in value of any physical property such as vintage cars or pieces of art. Your advisor can help you determine whether any strategy changes are necessary to maximize the return on your retirement savings to cover these expenses.

Educate yourself on basic investment principles.

Although your advisor can help guide you through the technicalities of retirement savings, you should still not take a completely hands-off approach to your savings -- especially since how you save is often just as important as how much you save. Take the time to understand how your pension or savings plan is invested, and ask questions about anything you do not completely understand.

Increase your investment as your income grows.

Life's many unforeseen expenses can make it difficult to increase your retirement savings. Therefore, take advantages of unforeseen income boosts to help counteract this tendency. For example, windfalls like tax refunds or yearly bonuses can help increase your normal retirement savings as time goes by.

Of course, these are just a few strategies to help boost your retirement savings. Keep in mind that you and your advisor should continually monitor your retirement strategy and update it as necessary. Your goal is to be able to maintain the lifestyle you prefer after you cease working, allowing you to focus on time with your family, volunteer work, hobbies and similar pastimes.

image: http://www.flickr.com/photos/dreamcatcher-photos/

Comments

Monica 2012-06-21 04:34:34
Thanks for the great article. I really enjoyed it.

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