1. Calculate your needs
Your first step towards retirement planning might be to calculate your financial needs. AARP offers a retirement calculator that you can access for free online. The tool asks for various pieces of information such as your expected retirement income from a 401K and social security. With that information, it will help you to calculate how much you should be saving, how long you may need to work, when you can retire, and how much you will have to live on month-to-month after your retirement.
After you look at the next steps you may want to do additional calculations. Of course, you can also return to the retirement calculator in the future, as you continue to refine your retirement planning.
2. Set retirement goals
People often say that to reach a goal, you must start with the end in sight. There is a balancing act between when you want to retire and when you can retire. There are financial and personal factors to consider. By engaging in personal reflection, and talking to family about your goals, you can determine what it is you want for your retirement and from your retirement. Then, align your planning with your goals, and adjust your goals as needed to ensure you do not retire early, before you can truly afford it.
3. Start saving and investing
Of course, most people know that in order to retire, you will need to save money towards the future when you will no longer be working and drawing a steady income. Different people will make different recommendations for how much you should save. 10-15% of your monthly income may be a reasonable goal. If you can save more, then it is certainly a great idea to save as much as you are able to afford.
Beyond just saving, it is also wise to invest your money. There are various ways to invest your money so that you earn more than just interest from having it sit in a bank. The types of investments range from simply buying stocks to having a 401K to having an entire investment portfolio.
4. Insure your future
Beyond just having money to live on for your monthly expenses, you will likely want to also insure your future. Having your standard home insurance and health insurance is a must to cover the various expenses that could occur during your senior years. However, retirement planning may also involve investing in long-term care insurance and life insurance. By making these investments earlier and having them be a part of your standard monthly expenses, you will be able to plan for the long-term costs.
These additional types of insurance are truly an investment in your future. Unexpected care costs can quickly deplete your savings. You also want to ensure that your family has no undue expenses after your passing. Life insurance will cover necessary costs and provide for your family’s future.
5. Talk to a financial advisor
Fortunately, you do not have to figure out retirement planning all on your own. Financial advisors are specially trained to help people plan for their financial future, including ensuring they have the finances ready for a peaceful retirement. If you do not currently have a financial advisor, look for one in your local area. Find one whom you feel comfortable with, that you can work with long-term.