Did you know that 35% of Americans have no money set aside for retirement? This means that there are going to be a lot of people struggling when they reach retirement age. Social security does not pay enough for most people to live comfortable lives.
But how are you supposed to start planning for retirement? How soon is too soon, and what’s the best retirement plan for you? Let’s talk about it.
Keep reading for a few top tips for retirement.
1. Know Your Needs and Goals
Many people are putting away money for retirement without considering what retirement is going to look like for them. While setting aside money is always going to be a good idea, you should have some semblance of structure.
While it’s hard to predict inflation, try to get a good idea of how much your life is going to cost once you’re ready to retire.
How much is your mortgage going to be? Are you going to want to move into a retirement community? Have you considered medical expenses?
You can’t rely on social security when you’re making these goals. Some people estimate that you’ll need up to 2 million dollars to live a comfortable life post-retirement.
It’s helpful to work with a financial advisor when you’re planning ahead like this.
2. Start Early
If you’re only in your 20s or 30s, you’re at the perfect age to start preparing for retirement. It might feel too early, but even if you can only set aside a small amount of money every week or month, you’ll make a big difference.
Start thinking about your will at this time as well, especially if you have a partner or children. Remember that you can always amend your will later. Talk to an estate planner about the types of wills that would be best for you in your current situation.
3. What’s the Best Retirement Plan? The Differences
You have a variety of investment plans to choose from. While you can save money for retirement in a basic savings account, this is a bad idea. You’ll be losing money to inflation instead of gaining money on investments.
A traditional IRA is a good option for some people. You invest with pre-tax dollars, which means you’ll have to pay taxes later on. That said, most people are in a far lower income bracket when they retire, so your tax contributions will be lower than if you were paying them now.
A Roth IRA is similar, but you can pay with after-tax dollars. This means that you withdraw the money tax-free in the future.
Most people can only add $6,000 to their IRA per year (either Roth or traditional). That number goes up to $7,000 after age 50.
If you’re lucky, your workplace may offer a retirement plan in the form of a 401k retirement plan. Employers are able to match contributions and the contribution limit is much higher.
There are other types of retirement plans available, so it’s important to talk to a good financial advisor about your options.
Retirement Planning Is Crucial
If you haven’t already been looking into the best retirement plans, you’re behind! Start setting aside money and working with a financial advisor to help you find out what’s the best retirement plan for you.
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