Retirement planning is the strategy you put in place to keep your finances in order when you leave employment. Retirement planning consists of five steps: determining when to begin, calculating how much money you’ll need, identifying priorities, selecting accounts, and selecting investments.
In general, the objective is to invest more aggressively when you’re younger and then gradually transition to a more cautious mix of investments as you near retirement age. You can handle your retirement funds on your own or engage a professional.
Financial security in retirement does not happen by accident. It takes preparation, dedication, and, yes, money …
For those reading this who are below age 40, It’s possible to retire by 40, but it takes a lot of planning (and aggressive saving) to achieve it. If you are over 40, fret not. You can still plan for your retirement. Here are a few steps to help you prepare and plan for your retirement.
Step 1: Know when to start retirement planning.
When should you start thinking about retirement? In a nutshell, now. In three words, when you’re in your twenties. The sooner you begin planning, the longer your money has to grow.
However, it is never too late to begin planning for retirement. Even if you haven’t considered retirement, don’t think your ship has sailed. Every penny you can save now will be much appreciated later. If you are already saving, whether for retirement or another goal, keep going! You know that saving is a rewarding habit. If you’re not saving, it’s time to get started.
Strategic investing may ensure you won’t have to play catch-up for long.
Step 2: Figure out how much money you need to retire.
Know this, retirement is expensive. The amount of money you need to retire is a function of your current income and expenses, and how you think those expenses will change in retirement.
Experts predict that you would need 70 to 90 percent of your pre-retirement income to sustain your quality of life once you quit working. Investing a good percentage of your earnings now will surely help you in the future.
Step 3: Learn about your employer’s pension plan
If your business offers a traditional pension plan, find out if you are covered and learn how it works. To find out how much your benefit is worth, request an individual benefit statement. Find out what will happen to your pension benefit before you change jobs. Discover any benefits you may have received from a prior workplace.
Step 4: Don’t touch your retirement savings.
No matter what you do, don’t touch your retirement savings. If you withdraw your retirement funds before time, you will lose principal and interest, and you may forfeit tax benefits or even face withdrawal penalties. If you change jobs, leave your savings invested in your current retirement plan, or roll them over to an IRA or your new employer’s plan.
Step 5: Consider basic investment principles
How you save is just as important as how much you save. Inflation and the type of investments you make both have an impact on how much money you’ll have saved when you retire. Understand how your savings or pension plan is invested. Learn about your plan’s investment alternatives and ask questions. Place your savings in various sorts of investments.
You can also diversify your portfolio with various asset classes such as Stocks, Treasury Bills, Bonds, Eurobonds, Agriculture, and Wealth Cash available on Wealth.ng. Simply sign up or login into your account to get started.
Start investing today and remember, It is your ignorance that costs you money in life!