5 Tips To Help Responsible Dads Plan For Retirement
Has your job left you stressed out and dreaming of retirement? While life without work may seem an eternity away, it's actually closer than it seems. Which means, the time to prepare is now. Planning for retirement today and envisioning your life post-retirement can help you save enough to enjoy the rest of your life without having to worry about income or depleted accounts. Here are a few major ways you can take responsibility for your retirement and plan for a bright future.
1. Envision Life After Retirement
You've worked hard all your life. Once you retire, you'll have so much more time to do things you've always wanted to do. Do you wish to travel the world or move to a sunnier, beachy location? Or do you want to spend the days after retirement cozied up at home reading books and spending time with your family? Figuring out what exactly you want to do will help you plan better as you move towards retirement. So, when you do retire, you'll have enough money and resources to do exactly what you'd like.
2. Estimate Expenses
Once you decide how and where you want to live, you can better estimate your expenses. One of the biggest expenses may be healthcare since price typically increases with age. Medicare may cover routine health costs but, as you age, you may find you need to see specialists or schedule more doctors' appointments. Supplemental coverage can help pay for these expenses without draining your bank account. Additionally, you'll want to consider living, travel and other expenses to help you budget and ensure your savings last the rest of your life.
Of course, it's always better to overestimate your expenses rather than underestimate. The average woman can expect to live to about 86 while men can expect to live until age 84. So, generally speaking, your expenditure should be low enough that your nest egg can support you until then. And many certainly live much longer than that. So, it's better to overestimate expenses, just in case you do live to be 100 or encounter serious and expensive health problems.
3. Calculate Income
Net, you'll want to calculate your income. Estimate income from all sources including Social Security and employer pensions. Then, use this information to determine how much you'll have to take out of savings and investment accounts after spending your income. As a rule of thumb, som experts recommend only spending 4% of your portfolio annually in retirement. So, if you have $500,000 in assets, you should only spend $20,000 a year. Although this percentage may need personal adjustment over time, it can be a great starting point.
If you realize your income won't be able to sustain your post-retirement ventures, you may want to look into boosting your retirement funds. You might do this by postponing your retirement date a bit longer or reducing expenses now to help save for later. Deferring Social Security payments for as long as you can is also a good way to increase income later. For each year you postpone, your monthly benefits grow by 8% until you're 70.
4. Invest and Diversify
It may be tempting to shy away from the stock market and reduce risks or even heavily invest in stocks if the market is good right now. However, both tactics can poorly affect your income after retirement. If you are too conservative, you may not see an adequate return on investment. And, if you invest too much, you risk losing that money if the market drops. Thus, it's smart to seek the help of a financial advisor who can help you balance your investments.
Regardless of how much you choose to invest in the stock market, it's crucial you diversify your portfolio. Therefore, if one company takes a hit, your balance won't nosedive. Investing in various and even opposing stocks, bonds, commodities, and real estate can also increase your chances of a higher return on investment.
5. Take Advantage of Retirement Accounts
Whenever possible, it's a good idea to increase your retirement contributions to your 401(k), IRAs or other retirement accounts. Many companies offer to match your contributions after you reach a certain dollar amount. So you should at least aim to meet that threshold, taking full advantage of the accounts and employee perks while you're still working. Catch-up contributions after age 50 may also allow you to set aside more than usual to place in your account.
As you near retirement, it's also smart to consolidate your accounts for a clearer picture of your total assets. Rolling over your retirement plan to an IRA rollover or simply combining similar IRAs under one institution can help accomplish this. View any accounts you still have with former employers and speak with your financial advisor to find the best method of simplifying your assets.
Start Planning Early
When retirement is 10 to 20 years away, it can feel like a lifetime away. But retirement can creep up on you if you don't plan accordingly. Thus, preparing for retirement early in life will give you enough time to save for all the exciting things you plan to do later on. Because if you wait until the last minute to start investing or saving, you may be stuck working into your late 60s or even 70s. So save yourself the work and worry by planning early for the retirement you've always dreamed of.