You may ask yourself: Do I have enough money saved for retirement? How much should I put aside at my age to be ready for retirement? Before you can answer these questions, you need to look at the broader view of retirement. What does retirement mean to you? What goals do you have for yourself? Do you want to spend your post-career years traveling the world or staying at home spending time with your family and friends? Do you plan to continue working part-time, seasonally or freelancing? What lifestyle do you plan to maintain? The answers to these questions will determine how much you actually need to retire.
To know if you will be financially secure in your retirement, you’ll need to estimate your day-to-day living expenses now so to discover how much it will cost you to achieve your goals for retirement. For the first task you can track your daily expenses now and estimate any adjustments you can anticipate in the future. Financial management at its core is tracking and controlling the flow of money in and out. In respect to your retirement, you will also need to know what income and expense you plan to have in the future when you retire. Choosing whether or not to work during retirement, how many hours and the terms of your work life is both a financial and a lifestyle decision. Many retirees keep working to stay active and keep their minds engaged, although for some it’s a financial necessity. Another retirement factor to consider is the timing of your first Social Security benefit. Your monthly benefit will increase if you can afford to wait. AARP provides this social security benefits calculator to help you time your benefits to your best advantage.
Once you know how much money will be coming and going, you can begin to prepare with a vision in mind. You will never reach your retirement goals if you don’t have any. When you know what you want, AARP will help you get there, making retirement finances simpler with their step-by-step retirement calculator factoring in your age, marital status, income and lifestyle. It’s not a replacement for a financial advisor, but it’s a great place to start for those overwhelmed by the scope of the planning process.
If you find that you need to save more for your nest egg, you have options no matter what your age. It’s never too late, and for those over 50 there are government incentives to increase your contributions. Tax laws allow you to contribute up to $22,500 pretax to a 401(k) or 403(b) from age 55 until retirement. Look for investments options with minimal management fees, as these eat away at your profit without guaranteeing better returns.
Retirement planning is more than just crunching the numbers and socking away money. That’s crucial, but it’s not the whole picture. Retirement doesn’t have the same meaning for everyone, and knowing your goals for retirement is the key to saving for your golden years, however you choose to spend them.