Retirement Planning Guide: Tips for a Safe, Secure, and Fun Retirement

Whether you plan to retire at 65 or 70, the simple fact is that we will all retire eventually. A common fear for a lot of people is not retiring with enough money to have a comfortable retirement. A retirement plan helps you put strategies in place to ensure this does not happen. Planning for retirement is a complicated process but at the end of it, you should have a large enough financial cushion to retire comfortably. When coming up with a retirement plan, you need to think about the goals you want to achieve before you get to retirement. Remember that everything is tied together and what you do today as well as how you spend and save will determine the type of retirement you will have.

Retirement Planning: an Overview

When planning for retirement, start by thinking about your goals and how much time you have left to achieve them. Then, you need to think about how you can raise enough money to have enough to retire with. You might also have to think about investing your savings, so they grow as you near retirement, as this increases the amount you retire with. We will look at all these and more, as well as look at some tips to ensure you have a solid retirement plan.

Know How Much Time You Have Left

Your age as well as the age you wish to retire at will be the foundation you build your retirement plan upon. If you are in your 20s or early 30s, you have a lot of time to plan for your retirement as well as save for it. This means you might not have to save a lot of money monthly or annually for your retirement, as you have longer to save for retirement.

Additionally, if you have 30 years between now and your retirement, you have some leeway to put your money in some riskier investments such as stocks. While these riskier investments will be affected by market forces and volatility, studies have shown that stocks outperform most other types of securities in the long term (more than 10 years).

For young investors, you also need to think about investing in options that grow at a higher rate than inflation. If the rate of inflation is higher than the percentage returns your investments bring, you are at risk of having your savings eroded by inflation due to the power of compounded inflation.

As you get older, your portfolio should switch to investments that bring income and help you preserve capital. Securities such as bonds are a great option here because they are less volatile and will give you an income on which to live. You also do not have to think about inflation because there is less time for inflation to significantly affect your savings and investments.

Determine Your Retirement Spending Needs

Your retirement portfolio will also be largely affected by your spending habits post-retirement. Although many people can survive on 70-80% of what they used to spend before retirement, the exact number is hard to pin down for different people. This is especially true where financial obligations such as loans and mortgages are yet to be taken care of. It is also the case if the retiree has unforeseen medical expenses.

Also, do not forget that you might spend the first few years of retirement travelling or doing things you didn’t get around to doing when you were younger.

Understanding all this, it is easy to see why financial experts say that your post-retirement spending should be closer to 100% of what you used to spend before retirement.