Retirement may seem a long way away. For some, it may seem like a pipe dream.
But there will be a day when you will want to retire from the work world, and the only way that is going to happen is if you begin planning now.
While most of the preparation for retirement involves finance questions, there are other matters that should be taken into consideration as well. Family concerns play a role in when and how you retire.
The first step in retirement planning is to figure out where you are in your retirement planning right now.
If you are invested in your company’s employee-sponsored defined contribution plan (a 401K or other such vehicle), then you have started a retirement plan. But that account is not just a depository for funds you and your employer provide.
The money is invested in mutual funds. You can talk to an advisor who works with the firm that manages that account to determine if your funds are being invested in a manner you like. Take an active interest in the funds you are already allotting to your retirement.
The second step is to look at your current finances and consider how you are spending money now. Many people who have a consistent income do not create an actual budget for their finances, and eventually come to realize they should have done so a long time ago.
Any budget you create can have a spot assigned for funds you want to put away for retirement. Create that budget now, or if you have one already, reassess it to make sure you are planning properly for future needs.
There are websites available that offer free retirement planning guidance, and the U.S. government provides several. Those sites also provide information on ways the government provides for a healthy retirement for its citizens.
The third step to creating a retirement plan is to decide what retirement means to you. If you think retirement means resting, then you may not need a huge sum in your retirement account. But if retirement means cutting loose and traveling the world, then that account needs to be growing every day.
Keep in mind that if you have a successful career, your retirement could come at a time when you have decades of life ahead of you. Life expectancy in the United States continues to extend as medical services improve, and you might have 20 years or more looking ahead from the day you retire.
The fourth step is to invest a portion of your retirement funds in accounts which provide income when you retire or reach a certain age.
Tax-deferred retirement accounts such as Roth IRAs are designed to create a retirement fund you cannot touch (without the severe tax penalty) until you need it, and creates actual income in retirement.
As you put funds into an IRA or an annuity, those accounts actually create more income for you to use down the line.
If these instructions seem complicated, there are professionals who can assist you with making the proper plans for retirement. It is possible to talk to a financial advisor as a one-time conversation about the choices you should make in order to make your retirement a successful one.
That professional will take into consideration all that you already have in place, products that could create additional income in retirement, and your eventual Social Security payments to develop a plan that can give you an actual dollar figure on what your retirement fund will look like when you need it.