4 Retirement Planning Steps Everyone Should Take
As seen in Forbes on October 1, 2018
Envision Your Retirement: To get anywhere in life and achieve success, you need a vision of success. Start by envisioning what you see as a successful and financially secure future in retirement. This technique of creating a mental image of the desired outcome is used by many of the most successful professional athletes and business entrepreneurs. Athletes mentally envision how the perfect race or game will play out long before they take the field. Of course the plan doesn’t always go perfectly, but imagining the future can at least help you develop a game plan. By adopting this technique, you can set goals and realize that the future you want is achievable. Do you want to have financial independence? What does that look like for you? Does that mean you will live independently or with family? Do you want to travel or would you prefer to stay in your community? Any retirement plan starts with setting your own goals and envisioning your desired outcomes.
Review Your Current Situation: After you envision where you want to go, you then need to take a look at where you are today. We can’t get anywhere without first acknowledging and knowing where the starting line is. If you are in the early stages of your career and just getting started with savings, how are you going to handle your investments and debt management? If you are mid-career, is now the time to really ramp up your savings? Or are you in your peak earning years? As State Farm Agent Jen Sias-Lyke points out “many people hit their peak earning years in their 50s and early 60s.” But she also notes that “The closer you get to retirement, the more focus you’ll need on planning.” So as you near retirement, you need to see if your debt is under control, do you know what you are spending each and every year, and do you have a retirement date in mind?
But, for all career and life stages a few important questions always stand out. First, are you managing your debt? Second, and usually tied to the first, are you managing your expenses? The answers might mean you need to set up a more detailed budget and stick to it. And lastly, are you saving and investing appropriately? This means that you are both setting money aside for retirement and investing in assets that will provide you with returns that match your risk tolerance level. At a younger age, you should be willing to take on more risk and be more heavily invested in stocks. As you near retirement, you can take some risk off the table and invest in more bonds, CDs, and annuities.
Calculate Your Retirement Needs: Now that you know where you are and where you want to go, you can do a quick retirement income calculation. This is crucial if you want to know if you are on track for retirement or if you need to make some additional moves and changes to improve your situation. When you are young, you can consider the basic rule of thumb: you will need approximately 60 to 80 percent of your pre-retirement income in retirement. But as you approach retirement, you will want to track what you are currently spending and adjust that amount accordingly to account for possible lifestyle changes during retirement.
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