Planning Retirement – Overview
Retirement is viewed as a great dream by many. Planning retirement is all about assessing your goals and then understanding how you can reach them.
Many people are too vague when it comes to planning their retirement.
People have rough ideas about traveling, or buying a second home, but don't actually know what they want, or how to go about getting it.
Retirement Planning Tips
This article provides 6 retirement planning tips that are designed to help you get more specific with your plans.
By formulating a plan, knowing some of the pitfalls that are out there, and coming up with a clear strategy for achieving your retirement goals, you're setting yourself up for a great retirement.
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However, these are guidelines, tips and thoughts only. The truth is that your retirement planning and goals can and should change over time.
The key is to stay fluid and be aware of these changes so that you can adapt your retirement strategies as you go to accommodate them.
6 Things You Should Know for Planning Retirement
1. Set Your Goals
Before you can figure out how to achieve your retirement goals, you need to clearly articulate what they are.
Planning retirement isn't simply about choosing the day that you get to quit working. It is also about choosing what you want to do with your golden years.
When you're setting your retirement goals, be as specific as possible. You might try to define things such as:
- Do you want to stay in your current home, or do you want to downsize or upsize?
- Do you want to travel? If so, how much and how often?
- Do you have other planned expenses, such as caring for a late-in-life child?
- What kind of insurance costs will you incur?
- Do you have new hobbies you want to pursue?
- Do you have other major purchases that are part of your retirement plan?
Answering these types of questions beforehand will make retirement planning much easier for you and your financial advisor.
2. Create a Budget
Sitting down with a financial advisor or retirement specialist is a great way to start planning retirement.
They can help take the dreams that you've articulated in the step above and turn them into a measurable budget, while also including things like the cost of living, emergency expense cushions and other necessities.
Another consideration when planning retirement is that there are many expenses that need to be planned for, and which can be easily overlooked.
That is why consulting with a professional who specializes in this type of financial planning is so important.
3. Evaluate Your Retirement Expenses Over Time
It is important to re-evaluate the costs of retirement from year to year.
Setting a retirement plan and then assuming 10 years later that you'll need the same amount to retire that you initially assumed is a good way to find yourself at 65 with a vast shortfall of funds.
Constantly reevaluate the costs of the things you need to pay for when in retirement.
Every year, the projections about how much the average person needs to retire seem to rise, and you need to keep pace with those numbers with both your savings and your expectations in order to be ready when retirement finally rolls around.
In 2009, when the market crashed, many people saw their retirement savings dry up overnight. When planning retirement, you should keep the lessons of that crash fresh in their mind.
Diversification in your retirement investments helps you to avoid any potential disasters. When you're conducting your retirement savings plans, you should spread your assets out over a wide variety of companies, financial products and investment categories.
This helps isolate you from any one industry or sector collapse, such as the auto industry collapse that happened during the great crash.
5. Protect Your Principle
When planning for retirement, you want to try to avoid dipping into the principle of your investments as much as possible.
You want instead to focus on investment products that will pay you out a steady stream of cash to live on. The longer you can leave your principal investments untouched, the more guarantee you have that you'll be able to handle your quality of life during retirement.
6. Expect the Unexpected
When planning for retirement, it is important to recognize that there is still the potential for many surprises. Health care is a particularly important area to plan for, as medical expenses typically rise into old age.
This could cause both an increase in the cost of your medical insurance, as well as the cushion in your savings you will need to cover potential emergency medical care that might not be covered by your insurance plan.
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