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5 Steps to Prepare for Retirement Today

By: David Kuzma
|
April 24, 2022
April 24, 2022

5 Steps to Prepare for Retirement Today

Are you thinking about retirement or reaching full retirement age? If so, it's never too early to start planning! In this blog post, we will discuss five steps that you can take today to prepare for a happy and comfortable retirement. Even if you're just starting to think about retirement and your financial future, it's not too late to get started to ensure you have enough money when the time comes! So read on for some helpful tips.

1. Calculate how much money you'll need to live comfortably in retirement

When you are looking at your retirement planning, one of the first things you need to do is calculate how much money you will need in your retirement savings and how much income you'll need to live comfortably. The amount of retirement savings will be different for everyone, depending on your lifestyle and retirement goals. But it's important to have a goal in mind so that you can start saving accordingly.

There are a few different ways to calculate how much you'll need, but one simple method is to multiply your current annual income by the number of years you expect to be in retirement. So, if you make $120,000 in annual pre-retirement income and you want to retire in 20 years, you would need to have saved $120,000 x 20 = $2,400,000. Of course, this is just a rough estimate and you may need more or less depending on your circumstances.

Another way to think about how much you'll need in retirement is to consider what percentage of your current income you will need to maintain your lifestyle. For example, if your current annual spending is $50,000 per year, and you want to retire on 80% of your current income, you would need $40,000 per year in retirement.

Also, keep in mind when you're thinking about retirement income, you will also be receiving social security payments at full retirement age as well as spousal benefits if you are married.You may be able to pay all your living expenses and qualified medical expenses with your social security income which you could then use your retirement funds to provide income for your lifestyle expenses.

Once you have a goal number in mind, you can start saving accordingly.

2. Invest early and often to allow your money to grow

One of the best things you can do for your retirement is to start investing as early as possible. The sooner you start, the longer your money has to grow and achieve compound growth. Even if you can only invest a small amount each month, it will add up over time and you'll have more money than if you didn't start early.

There are many different ways to invest your money, so it's important to do some research and figure out what makes the most sense for you. Your retirement and investment accounts could include a combination of a traditional IRA, a Roth IRA, a regular brokerage account, savings and checking accounts and your employer's retirement plan.

The most common is to invest in the stock market through your employer's retirement plan, also known as a 401(k). Most retirement plans have options that may include stocks, bonds, mutual funds, index funds, and real estate funds. Your retirement account may also include target-date funds which is a diversified mutual fund, have a low cost, and become more conservative as you approach your desired retirement age. This can be a great investment option for those that don't want to think about making changes to their investments or aren't sure what to do.

In addition, most 401(k) plans include employer contributions, which means the company will make a matching contribution into your retirement plan on your behalf based on your employee contributions. This is great news, it's essentially FREE money to help you achieve your retirement goals.

If you need some investment advice and help to achieve your financial goals, you can talk to a financial advisor or financial professional to get started planning for retirement. They can help you build a financial plan that understands your risk tolerance, investment goals, time horizon, investment options and make recommendations based on your individual circumstances.

Investing early is one of the best things you can do for your retirement planning!

3. Review your insurance policies and make sure you're adequately covered

As you get closer to retirement,it's important to review your insurance policies to make sure you're adequately covered. This includes your health insurance, life insurance, and any other policy that you may have.

If you're still working, your employer-sponsored health insurance will most likely cover you until you retire. But once you retire, you'll need to find your own health insurance. There are a few different options available, including private health insurance, Medicare, and Medicaid. You'll need to research each one to see what is available in your state and what will work best for you based on your health care needs and budget.

It's also important to have life insurance in retirement. If something happens to you, your life insurance policy will help take care of your family. There are many different types of life insurance policies available, so it's important to talk to an agent to see what makes the most sense for you.

Finally, make sure you review any other insurance policies you may have, such as homeowners' or renters' insurance. Many retirees make adjustments to their insurance coverage as they retire, to realign their existing policies.

It's important to review your insurance policies before retirement to make sure you're adequately covered!

4. Prepare a will and other estate planning documents

It's important to have a will in place before you retire. This document will outline your wishes for what happens to your assets after you die. If you don't have a will, your state's laws will determine how your assets are distributed, which may not be in line with your wishes.

In addition to a will, there are other estate planning documents you should consider, such as a living trust, power of attorney, and advance directives. These documents can help you plan for what happens if you become incapacitated and can no longer make decisions for yourself.

Estate planning is an important part of your overall financial plan and retirement planning!

5. Stay healthy and active so you can enjoy your retirement years!

 

The last step in preparing for retirement is to stay healthy and active! This will help you enjoy your retirement years to the fullest. There are many ways to do this, but somethings you can do include:

-eating a healthy diet

-exercising regularly

-avoiding tobacco products

-getting regular checkups and screenings

By looking after your health you will extend your life expectancy and potentially reduce your medical expenses in retirement. So, it's a win-win!

Staying healthy and active is important for everyone, but it's especially important as you get older. So make sure to take care of yourself so you can enjoy your retirement years to the fullest!

BONUS TIP: Don't forget about taxes!

Even in retirement, you're going to still need to pay taxes on your retirement money, and having a good tax advisor or tax professional provide you with tax advice can help you save more money and potentially achieve a lower tax bracket in retirement. By making smart investment decisions in your investment strategy and incorporating tax planning in your retirement planning, you can keep more of your money and have a higher quality of life in retirement!

So there you have it, five steps to prepare for retirement today! If you start taking these steps now, you'll be on your way to a comfortable and enjoyable retirement. So what are you waiting for? Get started today!