According to a recent Federal Reserve report, about a quarter of Americans have no retirement savings at all. This concerning statistic highlights the importance of financial planning and retirement savings. It’s never too early or too late to start saving for retirement, and this guide is here to help you get started.
Retirement is a phase of life where you can transition from work to pursuing new interests. It’s a time when you should have the financial freedom to do the things you love, while also enjoying financial security. Financial freedom in retirement means having enough savings and investments to cover your living expenses and allow you to enjoy your desired lifestyle without the need for full-time employment.
Without proper financial planning, retirement can be a phase of life that feels lonely, boring, and isolating. However, by taking control of your financial future now, you can ensure that your retirement is a time of fulfillment and enjoyment. This article provides several strategies to empower you to save for retirement and successfully plan your financial future.
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Saving For Retirement: How To Plan Your Financial Future
I understand that retirement savings can be daunting, especially when considering the piles of bills that must be paid and the constantly increasing personal/family needs. Still, retirement savings can be achieved with some planned and timely financial commitment daily, weekly, monthly, or yearly. Below are a few steps to help you conveniently save for retirement and successfully plan your financial future.
Estimate Your Retirement Needs And Set A Retirement Savings Goal
If you must save for retirement and successfully plan your future, you must identify your retirement needs and calculate the costs those needs would incur to satisfy them. You can begin by determining your basic needs to the secondary ones,s and consider emergency events, vacation needs,s and, most importantly, when you’ll likely retire and how long you might live after retirement. Answering these questions will help you set clear and précised retirement savings goals. After identifying these needs, you should estimate them as annual expenses. And then multiply the figure you’ll get by the 25x rule. The 25x rule is a guideline that suggests you’ll need to save 25 times your annual expenses to have a comfortable retirement. For example, if your yearly expenses are $10,000, you’ll need to save $250,000. This, of course, is dependent on the 4% safe withdrawal rate rule of thumb, which implies that in a 30-year retirement window, you can afford to safely withdraw about 4% of your retirement savings portfolio in the first year and conveniently keep withdrawing the exact figure after adjusting for inflation for the several years that follow.
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Determine Your Savings Rate
After estimating your annual expenses, consider how much you’ll need to save at an interval (daily, weekly, monthly) you will be comfortable with that would get you to actualize your annual expenses. For example, if your annual expenses are $ 50,000 and you plan to save monthly, you’ll need to save $ 4,166.67 each month. This is important if you must save for retirement and successfully plan your financial future.
Open A Retirement Account And Begin Saving
Now that you’ve figured out how much you need to save, you should open a retirement account. There are various options to consider, such as an investment account where you can invest in stocks(ETFs, index funds, mutual funds, etc.) for the long term or a savings account that is solely focused on the amount you save for example, Individual Retirement Accounts (IRAs) or Employer-Sponsored Retirement Accounts. You can choose the type of retirement account that suits your needs and begin saving. Setting up an automatic recurring deposit on your retirement account will help you save consistently.
Final Words
Your savings amount should not be restricted to a retirement savings rate when saving for retirement. If you must save for retirement and successfully plan your financial future, you must tweak your savings goals at any chance. If you can increase your retirement savings amount, then you should. Most financial advisors recommend you increase the amount you save in your retirement account until you reach at least 15% of the sum earned. You can even open an additional retirement account and keep saving, cut down on expenses to help you save more, take on side gigs that will pay you more and enable you to save more, and leverage on contributions and saving bonuses you receive. Remember, retirement is a long-term affair; you need to leverage anything, and any way you can save that’ll keep your head above water in the long haul.
