how-to-plan-for-retirement

How To Plan For Retirement

Choosing a specific retirement date is going to be a significant decision for you.

Regardless of your age, finances, personal background, and current living situation, plunging into retirement is not an easy decision and takes careful planning to make it stress-free.

The way we view retirement now is very different from how our parents saw ending work and becoming a pensioner.

We tend to live longer, are more active, and have more flexible income choices to enhance our money when we finally do decide to take the plunge and retire.

We now have the choice as to when to stop work; we may have saved early and made the right pension and investment choices.

So, it’s crucial that when the big decision time is ripe, that you take some time to think about the income you’ll need for the lifestyle you intend.

How To Plan For Retirement

1) Goal Setting

Perhaps something that is overlooked as a couple is to make sure you are on the same page when it comes to retirement.

You might have the goal of retiring at fifty and moving to that exotic country in South America you have always dreamed of.

Does that correlate with the dreams and aspirations of your spouse?

One of the first tasks is to sit down together and discuss each of your intended outcomes.

For all, you know your spouse wants to keep on working up to the age of seventy!

Work together to set both some personal goals and goals that you both aspire to.

The sooner you are aware of each other’s goals, and you can create a plan to work towards them and build your dream retirement.

2) Money

Finances are a big topic when it comes to retirement planning.

One of the first goals is to consider how much you are going to need to live a sustained retirement.

You need to build mutual expectations around the level of income you are going to need.

One of you might have the idea that you can live on half your current income while the other wants to maintain your current income level.

Getting some alignment around this will help for future planning of finances.

At the end of the day, each one of us is ultimately responsible for our retirement.

As you make joint financial decisions in your working life, this needs to carry over into retirement.

3) Pensions & Benefits

If you are still in employment and considering retirement, talk to your employer about what they could offer you.

Ask them to consider all options for you, which might mean structuring your pension differently or providing a contribution to healthcare.

When it comes to the state, benefits don’t be tempted to take them too early.

You can start claiming benefits at 62 but consider leaving them until you reach full retirement age at 66 or 67.

That way you will receive a bigger payout each month.

You have to wait until you are 59 and a half to access any IRS or 401K retirement plans without incurring penalties.

401K plans are probably the most popular employer-sponsored plans.

Every contribution an employee makes attracts a tax deduction.

All 401K plans though specify that you must start drawing from the age of 70 and a half.

4) Hobbies & Jobs In Retirement

You should, in theory, spend less in retirement than you did in your working life.

However, starting a course or taking up an expensive new hobby can make your monthly costs begin to spiral.

Think carefully about the longevity of any hobby, will you be able to be active in it in five or ten years?

Try to strike a balance between your urge to splurge today and the possible financial consequences later.

How To Plan For Retirement In Your 40’s

Let us now look at some scenarios for those of you that are not quite at retirement age.

What do you have to do to ensure your retirement is a successful one?

In your 40’s you are at the peak of your earning potential.

In theory, the experts tell us that by the age of 40 we should have twice our annual salary saved.

If you are not in that luxurious situation, here are some practical tips to get you at least on the right road.

First off, it is never too late to start saving.

Try to determine how much you think you are going to need in retirement.

Then start to save a proportion of your monthly salary.

Experts reckon that you need to save at least 10 to 15 percent of your income to have a comfortable retirement pot.

If you have left it late and now in your 40’s you might need to ratchet that up to 20 percent.

One fact to make it work is to put yourself first.

Put your retirement savings ahead of college fees for your siblings that sounds harsh, but they can access other forms of finance – you can’t.

Look to lower your debts.

Seek ways to either consolidate your debts to a more manageable level or seek out alternative solutions.

Make sure you get your spending under control.

Many of us spend far too much on so-called frivolous items such as that cappuccino from the corner store every morning, or that burger lunch on a Wednesday.

Minimize our spend on nonessentials and put that money in your pension pot.

Take full advantage of any employer-sponsored retirement initiatives.

Put as much money as you can into your retirement plan and ensure your employer matches those contributions.

Reaching the age of 40 is a significant milestone.

You have 20 to 25 years left of working life, start building an investment strategy to ensure your retirement lives up to your expectations.

How To Plan For Retirement In Your 50’s

When you reach the grand old age of fifty, the scary part is that many financial planners tell us we should have 300,000 squirreled away for our retirement.

If you have left it a bit late, there are still some practical things you can do to plan for retirement.

If you are fifty and pay into an IRA, you can also contribute an extra $1000 over the $5500 allowed.

If you are in employer-sponsored plans, you might also be able to contribute over and above the limits set in the scheme.

All of the above for the over 40’s also apply for the ’50s but maybe even more so.

Your ability to save is not as great, so reductions in expenditure and spending needs a sharper focus and redirection of funds into your proposed pension pot.

Retirement Calculator

In the age of the internet, there are now many online calculators that will help you determine what you need to put by to achieve your retirement income goals.

We have selected a few for you to try.

Nerdwallet

Vanguard

Smart asset

A retirement calculator will determine whether the rate of your current savings will be enough to sustain you in retirement.

The main components they ask for are:

  • current age
  • age at retirement
  • current income
  • expected income and living expenses
  • amount already saved
  • the amount I am saving now

They also make some common assumptions around levels of investment, life expectancy, investment growth, and inflation.

A retirement calculator can give you a general idea of whether you are saving enough for your retirement and is also useful for any ‘what-if’ scenarios.

Places To Retire On A Shoestring

To end or retirement planning post, we take a look around the world at some places to retire to if you have not quite got the finances you planned to have.

You might be surprised at the exotic nature of some of the places.

1) Puerto Vallarta – Mexico

If you are looking for a retirement destination, a short hop from the US, then Mexico might be for you.

Mexico boasts low costs, beautiful weather, and is a very hospitable place to rest your head.

A two bedroomed furnished apartment will set you back only $1000 a month.

You won’t feel alone wither as some 50,000 expats already call this part of the world home.

2) Atenas -Costa Rica

Another cheap retirement destination in easy reach of the US is Costa Rica.

It is warm, inexpensive and a beautiful place.

Atenas is a small mountain town with a temperate climate.

You can live very comfortably in Costa Rica from between $1300 to $1600 a month.

3) Buenos Aires – Argentina

If you are after the city life, then an apartment in Buenos Aires will only set you back $500 a month.

Healthcare, transport, and internet services are all cheap.

It is possible to live comfortably in this vibrant city on as little as $1000 a month.

If you opt for more rural Argentina, then your costs are even lower.

4) Algarve – Portugal

Our final shoestring destination is in the heart of Europe.

Over 100,000 expats already call the Algarve home and with great weather, English, and the food is excellent.

Prices on the Algarve are about 30% lower than the rest of Portugal so you will get more for your dollar here.

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