In the US, the average retirement age is around 65, although you can’t access the full amount of your Social Security until you’re 66.
How close or far away are you to 65? Even if it’s not for decades, before you know it, your 65th birthday will be here. And will you be ready for retirement?
To make sure that your golden years are comfortable, you need to start planning today. Here are 5 insights for retirement planning you should know!
1. Calculate How Much You’ll Need to Be Comfortable
You might have a ballpark number in your head as to how much you need for retirement. But will it really sustain you on a daily basis once you’ve actually retired?
As a general rule of thumb, match up to 90% of your pre-retirement income with your savings and Social Security. Then, multiply that by about 40 to be safe.
2. Start Saving Now
Even if you’re in your 20s, you should start saving now if you can. Reevaluate how you’re spending your extra money and see if you can shift some things to save more.
Of course, you should still spoil yourself with a nice vacation every once in a while because you deserve it. But do you really need to go to the Bahamas twice a year? Just making some small sacrifices now can help you have a much better retirement!
3. Pay off Debts as Soon as Possible
If you have debt, you’re paying a pretty penny toward interest. This is money that could go toward your retirement fund instead.
So what you’ll want to do is pay off your debts ASAP. Not only that, but you should do this smartly.
Focus on the debts with higher interest rates and balances first. It might seem tough at first, but in the end, this will save you a lot of time and money. And you need both to build up a decent retirement fund.
4. Move 401k Employer Contributions to a Roth 401k
How your employer match affects your 401k will depend on whether they do elective deferrals or annual additions. Either way, they’re beneficial to your retirement fund.
However, when you get to 10 years before retirement, switch to a Roth 401k if your employer offers it. This can help you avoid large amounts of taxes when you start withdrawing.
One of the best ways to get started on your retirement plan is to invest. After all, you’ll basically be getting money for free.
Don’t choose volatile stocks though. Instead, opt for safer ones that grow over time.
A good plan is to try the more volatile stocks when you’re younger and then slowly scale it back as you approach retirement age.
Start Your Retirement Planning Today
There’s no such thing as starting too early when it comes to retirement planning. And if you feel like it’s too late, it’s not! So long as you’re smart about it, you can quickly build a retirement fund that you can comfortably live off of once you hang up your working hat.
For more retirement planning advice, check out our other blog articles now!