It is never too late to start planning for retirement; however, the earlier that you get started, the more you will save and the better off you will be after you retire.
When Should I Start?
You should start saving your money as soon as you can. The best time to start saving is right after you have graduated from high school in your late teens and early twenties. Start saving as much money as you can. One of the first things that you can do is simply start a savings account and add so much out of every paycheck you earn. In time, your account will start to gather interest. The longer you save and let it grow, the more your interest will grow. Slowly build on your savings year after year, and you will have a start to a comfortable nest egg.
Setting Realistic Goals
One thing that you should think about when it comes to retirement is setting realistic goals for yourself when it comes time to retire. You should sit down and figure out how you wish to live your life when you retire. Try to be as realistic as possible. Do not go overboard on expenses and other unnecessary things of pleasure. You do not want to live a boring life of retirement; however, you also do not want to overspend by living in the lap of luxury, draining your nest egg sooner then necessary. When you factor in what you will get each month from your social security and other retirement benefits, try to figure out how much more you will need to not only get by but live to your expectations for the month. When you have done all of that you will know roughly how much you will need each year, and you can plan accordingly.
There are many types of investments that can be made to help fund your retirement, and you should be sure to research each option and take what you can when you can. One such investment is a 401k; this is a plan where you can invest so much of your paycheck every week. If you are lucky enough to have the right employer, they will usually meet your contribution, and in doing so, double the money put into your 401k account every week.
You want to be careful, however, when you change jobs. You will need to figure out what you will do with your 401k – you can leave it where it is if your former employer will allow that. You can also withdraw it, but there will be penalties for doing so if you are under the age of 55 and half years old. You can even transfer it to your new employer if it is allowed by the new employer.
IRAs are another form of investment that you can make to prepare for your retirement. There are two types of IRA that you can use. The first is a traditional IRA, which has a tax deferred growth. This means that your money grows, and that you will only pay taxes on it when you withdraw it. A Roth IRA will not offer a deductible contribution; however, it does offer tax free growth, allowing you to withdraw from it without the penalty of taxes.
When planning for your retirement, collecting stocks is another good investment. These have a high return on your investment over a certain amount of time. The more you have and the longer you have them, the chances of a high return are greater. However, you want to steer clear of bonds, as inflation will greatly deteriorate the purchasing power over 10 to 15 years. The best time to get bonds, if that is an option you want, is closer to your retirement date so that inflation will not have a chance to deteriorate them. You should see a financial adviser to find out all your options for saving and retirement. They will tell you to invest heavily in stocks and to steer clear of the bonds, at least until you are approaching the age of retirement.
Life insurance is a good investment to make as well. There are many whole life insurance policies that will allow you over time to borrow against the amount of the policy itself. This is a good thing to have and use if you have no other options left to you; however, you should use all other options available before doing this, as it will deduct from the actual amount of money that your loved ones will receive upon your death.
Making the Money Last
When you have actually settled down and retired there are also steps that you can take to assure that your nest egg will last all through your retirement. One thing that you can do when drawing money from an account is to be sure and draw from your taxable accounts first, letting the tax advantage accounts sit and collect as long as possible. You can also relocate to a lower cost of living area. Move someplace that has less rent or taxes.
When in retirement, always try to draw no more than four to five percent per year of the total amount of savings that you have stock piled. Talking to a financial adviser is a good way to help; they can assist you on a number of things from investing to budgeting your money and so much more.
Another thing that you might want to try while already in retirement is to take out a reverse mortgage on your home. The way this works is that it is a low interest loan for senior citizens. The amount of the loan is calculated by the percentage of the value of the home, which is determined by the youngest homeowner. This loan will not have to be paid back until the last surviving homeowner has either passed away or permanently moved out of the premises. At that time, the estate is given twelve months in which to repay the loan or sell the home to pay off the loans. Any equity that is left after repayment of the loans is left to the estate. The only requirements for such a loan are that you be at least 62 years of age, and the home must be owned free and clear, or at least have the balance of the mortgage to be no more than 65% of the value of the home.
If all else fails, you can always get a part time job somewhere. This will allow you to have an extra income so that you will be drawing less of your nest egg there by expanding the life of your savings to assure that you will have as much as possible to live on for the rest of your retirement.
There are many different things that you can do to prepare yourself for retirement, from working and saving ,to 401k and IRAs, to investing in stocks, and a variety of different things that you can do. One can never be sure how the future will hold out for them, and you should always do everything that is possible to assure that you will have a long, healthy, and happy retirement.