How To Plan Effectively for Your Retirement

in Lifestyle

Retirement is meant to be spent doing the things you’ve always dreamed, or relaxing and enjoying the fruits of your long years of service. However, it is quite noticeable that most retirees do not get to do that. The inability to enjoy retirement is usually due to poor planning. The best time to plan for your retirement is when you are actively working. In this article, we shall look at how to prepare for your retirement within the next ten years. Look at your current lifestyle and envision how you want to live during your retirement. This outlook will provide you a critical insight into what to do before you actually retire. Here are some things to consider doing right now to plan for your retirement in ten years from now.

Diversify Your Investments for Growth

It is natural for many to be risk-averse, but you cannot make any significant gains without taking any risks. Investing is a great way to prepare for a sound financial future during retirement. You should consider diversifying your investments; a right mix of mutual funds, stocks, bonds, and other assets that are well-placed in your risk zone coupled with your liquidity needs and investment timetable is the best approach.

Take a critical look at your income sources and adjust them if necessary to fund your investment and retirement plans. Having a well-balanced portfolio ensures that you are capable of weathering financial downturns and fund your retirement expenses.

Make Use of Retirement Accounts

Taking full advantage of retirement accounts is another strategic approach to retirement planning. As much as possible, increase the contributions to retirement accounts by the maximum allowed by your 401(k) or IRAs. The goal here is to have enough put away in your 401(k) to qualify for the maximum matching contribution that your employers can offer. If you happen to be above the age of 50, you are allowed by the rules to set more money aside than the regular contribution.

At this stage, you should seriously consider consolidating your accounts. This will make it easier to manage your investments and give you a better idea of your total investment assets. Consider speaking with your financial advisor and even a mesothelioma attorney if you previously worked in an industry that is asbestos-related – there could be potential benefits that you don’t know about.

Reduce Your Debt

Paying off debts while in active service will ensure that you do not have to use your retirement egg nest to pay off accrued debt. Instead of going for credit cards, consider paying cash for most purchases to avoid the percentage interest that comes with it. For example, paying off a credit card that charges 15% interest is like earning 15% on a risk-free investment.

Calculate Your Potential Retirement Income

Look at your current expenditure and the potential income you could make during retirement. Retirement income includes employer pensions and Social Security; others could consist of personal savings and investment accounts. To have a fair idea of your potential maximum expense during retirement, use the old rule of thumb that states that you spend no more than 4% of your portfolio every year. So, for instance, having a 1 million in retirement assets means that your spending should be capped at $40,000 a year. Use this as a benchmark against your current retirement assets and make smart financial decisions today.

If you do not have a retirement plan, now is the best time to start. You must plan carefully, make sound financial decisions and set realistic goals. There is still time on your hands to prepare for the kind of retirement you want.


Image Credits: silviarita

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