Financial situations are bound to change upon reaching the retirement stage. With incomes decreasing, it can be quite difficult for some to keep up with their usual spending patterns. Making ends meet may even be more of a struggle for those who still have mortgage or loan balances to pay in full. If you want to enjoy a successful retirement, what’s most essential is that you start planning NOW.
Invest or save as early as possible.
Many people typically opt to pour their money into lucrative investments. Some go for stocks while others aim to get start-up businesses going. Not everyone has an eye for such financial ventures, however, so for these people, the most viable option would be to start saving early on.
The sooner you start saving, the more time your money will have to grow. Compounding allows for gains to build on prior years’ balance. It may be slow wealth accumulation, but it’s better than having nothing.
Be realistic when setting goals.
Project retirement expenses based on needs and not on rules of thumb. How do you honestly want your life to be after retirement? How much will this lifestyle cost? Once you have thought these out, calculate the amount you need to save to supplement your sources of retirement money.
Know where to contribute.
401(K) has been deemed one of the best and easiest means to accumulate money for retirement. Aside from it usually giving matching contributions as companies, it gives tax deduction as well as tax-deferred growth on savings.
There’s also IRAs to consider, which offer beneficial tax breaks. Traditional IRA typically offer tax-deferred growth. This means taxes on investment gains will only have to be paid when making withdrawals. For those who qualify, their contributions will also be deductible. Roth IRA, however, does not allow deductible contributions but allows tax-free growth. This means you will not have to pay any tax when making withdrawals.
It pays to know your options early on. Don’t wait until you’re just a few years close to retiring before you start planning for a retirement budget. By planning timely, you’ll get a better sense of control with regards to your future financial situation.