Whether you’re just starting to plan for retirement, or you’re retiring in the next year or two, there’s never a bad time to learn how to prepare yourself for the wonderful world of retirement. It takes a lifetime of savings and hard work to get to this point and it’s up to you to make the most of it. Here are 8 tips to help you prepare for your retirement, regardless of where you are in your career right now.
1.) Enroll in Your Employer’s Retirement Savings Plan
Most companies offer thorough benefits packages these days, and the majority of them include a retirement savings plan, or 401(k). Enrolling in your company’s 401(k) plan can actually lower your taxes and a lot of times your employer will kick in some money themselves to help you save.
Over time, your money keeps adding up and accruing interest, giving you more to pull from in your retirement. The earlier you enroll, the more you’ll be able to save. It’s never too early to start saving, so as soon as you find a job that offers a 401(k) plan, take advantage immediately.
2.) Know How Much You Need
A general rule of thumb when planning for retirement is to expect to live off of 70% of your pre-retirement salary every year.
Once you determine how much money you will need to live the lifestyle that you want during retirement, it will be easier for you to set savings and planning goals.
3.) Build Your Savings Account
Even though you may have a 401(k) plan from your employer, don’t neglect your own personal savings account. Treat your savings like one of your monthly bills while you’re working and contribute as much to it as you feasibly can.
This will be useful during retirement so you’ll always have an “emergency fund,” so to speak, available to you, just in case. There is no such thing as too much money in savings!
4.) Understand the Economy
Even though you’re saving and eventually your savings will start to accrue interest, you still have to keep in mind that the economy is consistently changing, and you should be prepared for those changes.
Inflation plays a huge part in how much interest you’ll make on your savings, so it’s a good idea to keep a watchful eye on the economy. This doesn’t mean you constantly need to check your stocks or anything like that, but be aware of what’s going on in the economy and understand how it is going to affect your investments.
5.) Find Out About Social Security Benefits
A general number for social security benefits is around 40% of your pre-retirement salary, assuming, of course, that you have social security benefits. Check with your employer and check your personal financial forms to insure that you will have social security benefits when you retire.
It’s never a bad idea to ask questions if you’re unsure of what your benefits are. Understanding how much money you’ll be able to budget for during retirement is a major part of planning, so do everything necessary to understand your benefits to their fullest extent.
6.) Don’t Touch Your Retirement Fund
Once you have a fund set up and you are making regular payments to it, DO NOT EVER take money out of it! You aren’t throwing money in there for the sake of having a place to keep it. You need to focus on actually saving it.
This is why you establish an emergency fund on top of a regular retirement savings plan – in case something comes up that needs to be paid for, you don’t have to dip into your retirement fund, you can simply use your emergency stash.
7.) Apply For Your Benefits Early
When you’re just about ready to retire, know that the Social Security Administration requires you to apply for your benefits 3 months before you expect to start receiving them.
There are laws for determining at what age you can retire, so be sure to check government websites to make sure you are eligible to start receiving your benefits, and plan to apply for them early.
8.) Think About the Non-Financials
Now that you have a savings plan in place and you know how much you need, it’s time to also consider the non-financial aspects of retirement.
Throughout adulthood, you start to build a social circle, so start thinking about which people you want to start spending more time with in retirement. Think about activities that you’ll enjoy doing with all of your free time. Even take the time to consider a healthcare program – you never know if you’ll need to take advantage of Medicare or Medicaid, so read up on the plans that are out there for older adults that are retired.
Most of all, prepare yourself for having more free time than you actually know what to do with. You don’t want to be bored during your retirement, so make plans to stay active and then stick to them. Do things that you never got a chance to do while you were working and spend more time with the people that are most important to you. Retirement is a beautiful thing, as long as you know how to plan for it and what to expect from it.
Jade Evans is a freelance writer who contributes to several financial wellness publications. She helped her own parents prepare for retirement and is happy to report that they have lived happily ever after in Illinois assisted living facilities. She knows the importance of saving for her own retirement and encourages people to really start saving and planning as early as possible.
- Options for Investing for Your Retirement (2009taxes.org)
- Why does Retirement Preparing Important? (williamodonohuephd.COM)