Young people often avoid the subject of retirement and anything remotely related to it as grim or something they don’t need to worry about for a long time. But knowing how your retirement plan will affect your life in the future might change your mind and possibly prompt you to see it from a different perspective and start planning for retirement.
Although it’s undeniable that most of the factors that go into determining what we do for a living are eventually dependent on outside forces, how we retire is a foreseeable, plannable, and even alterable choice. We’ll try and highlight some points that can help you along the way of finding the perfect retirement fit and how to go about planning for it.
Are You There Yet?
Needless to say, the sooner you start planning for retirement, the better off you’ll be in managing it and making it happen. Studies reveal the most content retirees are those who planned ahead at least five years.
According to the Social Security Administration, if you were born between 1943-1954, your full retirement age would be sixty-six. However, in line with the Administration’s regulations, you can retire as early as sixty-two. But you have to keep in mind that retiring early is not without its drawbacks.
If you decide to retire at sixty-two, you’ll receive 75 percent of your benefits, and your spouse will receive only 35-50 percent. These percentages go up the longer you work, peaking at age seventy and plateauing after that.
There are other choices in terms of retirement age. Many of us have probably heard about young people retiring in their late twenties. It takes a strong will and being incredibly tough (working around the clock, etc.) to achieve that. However, there are more manageable ways to get there in your fifties, which we will delve into below.
Planning for Your Best Years
When thinking about a comprehensive retirement plan, there are two main factors: how long until you get there (how many more years you have to work), and what goals/objectives you have, or to be frank, how much money you’ll need.
There are also other factors to consider when pondering early retirement – namely, personal reasons, such as the possibility of feeling a lack of purpose with all the newly-available free time on your hands, or more financial reasons, such as the potentially quite substantial healthcare and medical expenses.
How To Plan For Retirement?
It might seem that financial security upon retirement is more or less a guaranteed safety cushion. In reality, it is far from it. You’ll need to plan. In addition, you must demonstrate dedication, financial responsibility, accountability, etc.
According to research made by the US Department of Labor, only 40 percent of Americans have done the math on how much they’ll need for their retirement. In 2018, about 30 percent of workers in private industries who had some sort of a retirement plan didn’t contribute to it at all.
Let us review a few fundamental facts about the necessary preparations for retirement.
Save for Retirement
Saving is the most basic method for ensuring a more laid-back and worry-free retirement. Regardless of the amount, saving is a very rewarding habit, be it for retirement or otherwise. So, saving is the very first of your steps. However, it is important to stay committed to your savings plan and strive to boost the amount you put into your 401(k), IRA, or Roth IRA or even channel it into your long retirement account or investment portfolio.
Determine Your Retirement Goals
The money you’ll require to maintain a certain living standard is remarkably close to and correlates with your pre-retirement lifestyle. Therefore, it is vital to be constantly aware of what you require, what are your retirement goals, the sum you need to cover your expenses, etc. Thereupon, you can plan and act accordingly.
How Does Your Employer Fit Into the Picture?
Employers often offer retirement plans to their employees. Make sure to sign up and contribute to your employer plan-401(k) if you have one. It will likely prove very rewarding in terms of how it lowers your taxes as well as other financial benefits. Moreover, it usually entails tax-free services, tax-advantaged benefits, etc.
Employers sometimes offer a pension plan as well. You should check it out and ask for benefit statements to see how much it is worth. Pension plans might also cover spouses. Therefore, make sure to inquire and determine if you are entitled to any benefits on that front or even from your previous employers.
There are some employers that do not offer retirement plans. You can always suggest they start one, especially since both parties involved will be rewarded with benefits.
Knowledge Is Key to the Fate of Your Retirement Savings
The manner of accumulation for your retirement is as crucial as the amount. If you acquire enough knowledge and seek sufficient investment advice, you might even venture to mix it up and create a more profitable portfolio of investments with stocks, bonds, mutual funds, real estate, and other types of revenue. Knowing more could actually mean making more money.
Stay Committed and Don’t Touch Your Savings
It might appear like a good idea to solve your temporary financial problems by dipping into your retirement account. However, the fact is it will leave scars on your future. If you withdraw money from your plan before retiring, you might have to suffer consequences, such as losing tax benefits, incurring interest, having to pay withdrawal penalties, etc. It is important to act logically, keep your savings untouched, and, if necessary, roll them over into another retirement arrangement and make more responsible investment decisions.
Go Solo on the Side: Putting Money into an IRA
For starters, IRAs offer enticing tax advantages that can work for your benefit. Until you reach the age of fifty, you can put as much as $6,000 into an IRA account annually. After your fiftieth birthday, you will be entitled to contributing even more. There are ways to make automatic contributions from your other savings accounts into your IRA.
How Much Is Required for Retirement?
The million-dollar question is how much money one needs to retire. Another question is what retirement lifestyle one should choose. These issues are intertwined and codependent. The amount of money you earn while working determines how much you’ll make when you retire, and how you live will inevitably affect your lifestyle.
The Magic Number
There have been numerous studies conducted to pin down a universal number on how much is needed and enough to retire on. Although the fact is it differs from one individual to another, roughly speaking, 401(k) participants are of the opinion that, on average, they need US$1.7 million to retire on.
To Save or to Invest?
The safety, or better yet, the relative lack of accountability and responsibility that savings offer, make them the choice that most Americans make. It is true that it takes less time, thinking, strategizing, and research to put aside some money for a rainy day, but you should not underestimate the setbacks.
Saving works, but nowhere near as well as investing. Investment is the most optimal way to accumulate more through wise and well-advised choices. While saving ensures a steady flow of contributions to your retirement account, wise investing translates into much higher returns.
Retirement planning professionals believe that an average of 80 percent of the income received during your working years can make for a satisfactory living standard throughout your sunset years.
This, of course, is adjustable based on various factors that affect your retirement. They include the lifestyle you choose, the retirement investment portfolio you have managed to devise, and the type of benefits offered by your social security, pension plan, etc.
What’s the Ideal Plan for You?
Remember, the main factors to consider are when you want to retire and how you want to live through your sunset years, aka what kind of benefits you want to set aside money to maintain in your life.
Not everyone has the option to be picky and choose their retirement investment plan. Based on employer requirements and your financial situation, you might be obliged to invest all your retirement savings into one plan. In such an event, your best choice is investing in a 401(k) plan with your employer simply because it grows faster than its counterparts.
However, if you have the ability to choose and mix it up, your most reliable course of action is to do your research, get professional advice from a financial advisor, and create a retirement investment portfolio that provides you with the best possible tax situation – which is possibly the most tricky part of the equation.
The Appeal of the Newcomer: Self-Storage Investing
While many interpret the idea of saving for retirement literally, others opt to widen their risk tolerance for the sake of higher rates of return some choices offer. They tend to put their nest egg into more dynamic investments like the stock market, mutual funds, or real estate businesses. They aim toward securing higher rates of return in the long term. This is not at all a criticism of 401(k); that option indeed does offer tax advantages and safety. However, some investors prefer to take chances and walk through untrodden paths.
For these investors, a niche market like a new real estate market business can be far more enticing than the stock market. For instance, investment options such as self-storage facilities offer a relatively stable cash flow with minimum risk and maintenance costs. The steady income in self-storage units basically removes concerns over the need for catch-up contributions, obtaining loans or an emergency fund, credit card problems, social security payments, health care expenses, and many other retirement expenses. Hence, you might want to rethink the 401(k)-only strategy.
The need for a comprehensive retirement plan is easily justified by the gains it will entail. All you need to do is answer a few questions about yourself and your wishes for your future. If you cannot answer them, you can dig deeper, seek professional advice from a reliable financial advisor, and/or read up.
When you know what you want, you are then equipped with the requisite knowledge to answer the most pertinent questions about your plan, how to secure future retirement money sources, how to calculate the sum you will need to retire on, and whether to embark on a program to help you save or invest.
It is always advisable to have a detailed long-term plan. The sooner you begin, the more bountiful the rewards. A detailed and well-thought-out long-term plan pretty much ensures the desired outcome. So, start pondering about a thorough plan for your sunset years now.
We know that laying out the inevitable necessity of planning for retirement can be daunting and overwhelming. We are here for you. If you think putting some money in a secure investment with high returns sounds like a great way to get a headstart on your plan, then self-storage investing might be for you. We are more than ready to provide you with customized professional consultations in line with your requirements and lifestyle.