It is never too early to start thinking about retirement. Many things have to be considered and some of them involve long-term plans and others can wait until it is imminent. A few basic things can make the difference between a great retirement and a nightmare.
- Can you afford to retire?
- Are you ready to retire?
- What are your plans for retirement?
In order to get your retirement right, you need to do the basics in reverse.
~Your retirement plans
You need to know a little about what you plan to do with your retirement in order to know the amount of money you will need to make that plan come true. Do you see yourself retiring to Florida or some other warm weather state? Do you own a home? Do you plan to continue to own a home or do you plan to sell your home and move to an apartment or condo?
Do you plan on continuing to work part time or do you want to travel around the world? How is your health? Will you be able to afford to pay for your medication when you are no longer on your employer's health care plan? These are all important questions and they are ones that you should be asking yourself and also discussing with your financial adviser.
~When to retire
At what age do you plan to retire? When will you be ready to retire? Are you eligible for Social Security? Social Security can be collected as early as 62 years old at a reduced rate. Do you have a pension and at what age can you begin to collect it? Many pensions become available at a reduced rate at 55 years old.
If you are ready to retire will you have medical coverage or will you have to pay cobra or purchase medical insurance on your own? Are you old enough to be able to use Medicare? Medicare is available at age 65. Do you still have a lot of debt? Is your home paid for or do you still have a mortgage?
~Getting to your goal
What will it take to be able to retire at the age that you want to? First, now that you know what you expect from your retirement you need to calculate the amount of money that it will take to have the lifestyle that will make your retirement a pleasant experience. You need to calculate the number of years that you have left until you retire.
You then need to take into account everything that you have already in place. What is the current balance of you 401(k) or 403(b)? Do you have additional savings? Do you have an IRA or a Roth IRA? Do you have investments? What exactly is your current worth and what can you anticipate as your future worth?
~The plan
No matter what your current age, you need to have a plan, that is the one basic requirement of a retirement plan. It is never too early or too late to start to save for retirement. The benefits of saving some of your money in a tax-exempt account are many and also the Roth IRA which allows you to pay your taxes now and still save for your retirement. The key to a happy retirement is to have a diversified plan.
The amount of risk that you can live with depends on how diversified your investments are. When you are young, risk is acceptable, the older you get, the more secure your investments need to be.
These days it is foolish to trust that you will be able to retire with only Social Security to count on. Talk to an estate and financial planner and let them give you some advice about where you should be today if you want to have a secure retirement tomorrow. One thing you can count on is that there will be inflation and no matter how much you think you need, you probably need more.
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