It’s never too early to start. There’s no reason to be intimidated when thinking about saving for the future.
Start at the Beginning
Before planning for retirement, take an honest assessment of your current financial situation. Are you:
- Meeting your current expense needs?
- Putting money aside for long term savings?
The earlier you begin saving for retirement, the better.
Determining Your Retirement Timeline
It’s best to look at the full picture and determine what timeline works better for you. Early retirement offers the benefits of more leisure time, the ability to travel, and the chance to be with family and friends. Plus, retiring from your career doesn't mean you have to relinquish your earning power. Many early retirees start small businesses or move into part-time consulting roles. These plans help mitigate the biggest potential downside of early retirement: loss of regular income.
Understanding Future Expenses After Retirement
The best way to map out how to afford a comfortable lifestyle in retirement is to figure what living expenses you will have after retiring. It also makes sense to sit down with a trusted financial professional, such as myself, to help you on this journey.
What is Your Tax Situation?
Retirement account withdrawals may impact your tax bracket. It’s often determined by what type of account is being withdrawn from. Roth IRAs and Roth 401(k)s have qualified withdrawals that are tax-free. Withdrawals from traditional IRA and 401(k) accounts are taxable and treated as ordinary income. Therefore, it’s possible to end up in a higher tax bracket while in retirement.
It’s important to know that traditional IRAs and employee-sponsored 401(k) accounts are funded with pre-tax dollars. This allows contributions and earnings to build on a tax-deferred basis over time. That means you don’t have to pay tax on the money until you withdraw it during retirement.
Risk vs. Goals
Risk tolerance is often measured by age. Younger investors may be willing to absorb risks knowing there would be more time to recover from financial losses suffered. Older investors may be more interested in protecting what they have, happy with their minimal returns. Analyze your retirement goals. Plan a strategy that allows you to realistically reach those goals.
Estate Planning
A valid estate plan allows you to make decisions on how you want your assets distributed after you pass away. A legacy plan should be reviewed on a regular basis and updated as needed. A financial professional can help determine how you want your money dispersed. Include life insurance as part of your estate planning. It can provide death benefits to beneficiaries and help loved ones deal with expenses after your passing.
Let’s Talk
I’m here to help with any and all questions pertaining to retirement planning. Planning for retirement is a multi-step process. Understanding each step and its importance will allow you to feel more comfortable and secure that your retirement will be a time of peace, security, and enjoyment.
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