When it comes to retirement planning, it’s important to know the basics. After all, you’ll need to plan for the future of your family, as well as yourself. In addition to saving money, you’ll want to take care of your estate and manage risk. Here are some key things you should be aware of:
Saving for retirement
One of the best ways to avoid financial problems is to start saving for retirement early. This will give you more flexibility in your retirement years. The longer you save the more interest you will earn. To get the most out of your savings, you’ll want to diversify your portfolio.
A good rule of thumb from this website is to hold 5 percent to 10 percent of your assets in non-stock investments. There are two main types of individual retirement accounts: 401(k) s and SEP plans. Each has its own benefits and drawbacks, so be sure to pick one that will fit your needs.
You can use a retirement savings calculator to help you figure out how much you should be saving. Consider the amount you make in your current job, as well as any pension or social security income you may receive. Make sure to include other expenses, such as insurance and travel costs, in your calculations.
Creating a budget will also help you plan for retirement. You’ll want to include a line item for retirement savings. You can also set up automatic transfers between your checking account and your retirement account. This will eliminate the risk of spending money on unnecessary expenses.
Having a long-term care insurance policy will help you cover the cost of nursing home care. Also, you can consider renting rather than buying a house. While it’s cheaper in the short term, the value of a home will likely increase over time.
Identifying income sources
There are many sources of retirement income, including pensions, annuities, and investment accounts. Before you retire, it is important to identify those sources. The best way to do this is to determine your current financial situation. This will allow you to make a plan for your future.
Social Security, a federal government program, is often a reliable source of income. However, it may not be sufficient for your lifestyle. Unless you have a significant savings cushion, you will likely need to supplement your income with other sources.
Another option is to purchase long-term care insurance. These policies can help you pay for nursing home care, among other expenses. It’s also a good idea to keep an eye on health costs.
You might also want to consider real estate investments, which can be a safe way to add to your retirement savings. Even if you don’t use the money right away, the asset will generally increase in value over time.
Another option is to set up a SEP IRA. A SEP is similar to a traditional IRA, but is only for business owners with employees, but you should learn more information on investing in gold, first. In addition, you can contribute to a SEP even if you work part-time.
Other sources of retirement income include annuities, stocks, collectibles, and real estate. It is important to consider how inflation will erode the purchasing power of your income over time.
You can calculate your retirement income with a Sun Life Financial Retirement Calculator. Once you have your numbers, you can adjust your lifestyle so you can live on your resources.
Sizing up expenses
There are a lot of factors to consider when sizing up expenses for retirement planning. These include your age, expected life expectancy, sources of retirement income, and your current savings rate. The key is to come up with a budget that covers all of your needs.
It’s also a good idea to have a separate emergency account. This should have enough to cover three to six months of your salary. During a recession, it’s especially important to have a source of funds.
A good rule of thumb is to save at least 15% of your salary. However, this amount may vary from person to person. You should consult a financial professional or adviser to make sure you are saving the right amount.
Other sources of money include personal and workplace retirement accounts, pensions, rental income, and annuities. You should also consider the potential impact of taxes.
Some retirement experts recommend saving at least 12 times your pre-retirement salary. If you are self-employed, you may be able to open a SEP plan. In 2022, the contribution limit was raised to $61,000.
Another rule of thumb is the 4% rule. According to this rule of thumb, a person needs to save a certain percentage of his or her salary every year for the next 30 years (https://www.forbes.com/advisor/retirement/four-percent-rule-retirement/). Although this may sound simplistic, it’s a good rule of thumb.
The aforementioned 4% rule isn’t necessarily a true reflection of typical retirement spending patterns. For example, if you live in a good market, you may be tempted to spend on nice to haves, like designer clothes and vacations. On the other hand, if you live in a bad market, you may be more reluctant to increase your spending.
Using a savings program
A savings program is a good idea for many reasons. For starters, it gives you an excuse to actually save. Another reason is that it’s a tax write-off. In addition, it can act as a nudge to employees to be honest about their own retirement savings. As a bonus, it can act as a boon to the bottom line.
Plus, a well-implemented program can also act as a safety net should a storm blow through. After all, no one wants to be responsible for their own retirement. That’s where the SEP comes in. It’s not for everyone, though. If you’re looking to start a savings program for yourself, you’ll need to do your homework. Otherwise, your money could go to waste.
One of the better programs is the Secure Choice Savings Program, or SCSP, as it is more commonly known. This is a program designed to entice employers to offer a worthy savings plan to their employees. The name is a mouthful, but the program itself is pretty simple.
Most employees will be required to choose a matching program from their own employers. Depending on the size of the company, the program will also be on the books for a few years. To get started, you’ll need to contact an HR department for a budget and a few savvy employees. From there, it’s a matter of putting together a solid plan.
Managing assets and risk
One of the key drivers of portfolio performance over time is asset allocation. It involves balancing risky and risk-free investments. The composition of your portfolio will be affected by the type of asset allocation you choose.
Choosing an appropriate mix of assets for your portfolio can be a challenge. You must understand your risk tolerance. Knowing how much volatility you can handle is an essential part of managing your risk. Besides that, you should also remember that most people don’t care about the problems and concerns of others, so always keep that in mind.
Adding bonds can dampen short-term market fluctuations. In addition, stocks in your portfolio provide growth opportunities. They can also fund spending needs early in retirement. Another important factor to keep in mind is the risk of running out of money. You may have to increase your savings as you approach retirement.
That is why it is a good idea to keep a safety net outside your employer-sponsored plan. For example, buying an inflation-protected life annuity can increase your guaranteed lifetime income. Similarly, investing in a tax-free bond fund can offer stability.
Taking care of your family after you’re gone
Taking care of your loved ones in their golden years can be a challenge but it’s a worthy endeavor that should be encouraged by all means. So how do you do it? You’ll need to take the time to learn the ropes. After all, it’s a good thing to have a network of supportive folks in your corner.
Of course, don’t forget your own family. Having a happy wife or husband is the icing on the cake. To ensure that your cherished ones have the quality of life they deserve, here’s some sage advice to help get you there. This may mean you have to put in a few extra hours at work. Then there’s the problem of finding the time to make the time for family.