Retirees often dream of funding a new hobby, traveling, or even starting a small business. But they also need to ensure that their savings and other sources of retirement income will cover all their expenses.
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Identify Your Goals
The first step in flexible retirement planning is identifying your goals. Whether you want to travel more, pursue a new hobby, or spend more time with family, you need to identify what you want your life to look like in retirement.
You can then determine how much money you need to save to meet your goals. This will consider all income sources, including pension plans, savings, investments, and Social Security. If you have debt, it is also important to include that in your calculations. Passive income from an ownership stake in a business, royalties, or rental property should also be included in your calculations.
It would help if you also considered other potential expenses, such as medical costs and home maintenance. Including a few years of living expenses in your plan is helpful. This will help protect you if investment returns are low early in retirement. It will also allow you to continue saving without having to sell assets. You can then increase your contributions gradually over the years.
Also Read: How to Track Your Budget for the Month?
Evaluate Your Current Assets and Liabilities
Taking stock of your current assets and liabilities will help you understand where you stand. This includes your savings, investments, and any other retirement accounts. It also has your debts, such as mortgages and auto loans.
You should also assess the current value of your assets, such as your home and other real estate. These assets can provide income in retirement if you sell them. However, it would help if you considered the potential loss in market value and other factors that can affect the sale price of your property.
It’s also important to calculate the amount of money you will need to maintain your current lifestyle in retirement. Experts recommend saving enough to replace 70% to 90% of your pre-retirement income through savings and Social Security benefits. This number can be adjusted based on your preferences and lifestyle. The best way to achieve this goal is by saving consistently and carefully investing your money. This involves taking advantage of workplace retirement benefits, carefully selecting your investments, and avoiding high fees.
Set Realistic Goals for Saving and Investing
If you want to be able to quit your day job and retire comfortably, you’ll need to save and invest enough money to fund your living expenses. Create a budget and track your spending to determine how much to save. Once you know your average monthly expenses, multiply them by 12 to get a rough yearly budget. Then, to retire with an adequate income, you’ll need to save 25 times the amount you expect to spend each year.
Once you’ve determined how much to save, set realistic goals and create a plan to reach them. Consider increasing your savings by maximizing employer-sponsored retirement plans, investing in a diversified portfolio, and reducing debt. You may also need to supplement your retirement savings with other sources of income, such as rental property investments or part-time work. Finally, review and adjust your plan regularly in light of changes in your financial situation or new opportunities.
Create a Plan to Reach Your Goals
A clear plan for your future can help you stay on track to reach your goals. Setting dates by which you want to accomplish certain items can make them more realistic and attainable.
Establishing an emergency savings account and saving for retirement before paying off credit card debt can help you prioritize your finances. Keeping an eye on your budget can also give you a sense of how much you can comfortably spend in the long run.
The rule of thumb is to have enough saved for the first two years of retirement. This allows you to avoid selling investments during a market downturn and gives your money time to recover.
It’s important to review and adjust your retirement plan regularly. This helps to ensure that your goals are still on target and that you’re taking advantage of any opportunities. A fiduciary financial advisor can help with this process and guide you as you work to achieve your Ultimate Retirement.
Review Your Plan Regularly
Creating and sticking with a plan is the best way to ensure a comfortable retirement. Taking steps like estimating expenses, identifying sources of income, and making catch-up contributions can help you stay on track.
It’s also a good idea to reassess your plan regularly. This can be done as often as once a year, depending on your circumstances and goals. Consider any changes in your circumstances, expenses, or lifestyle. Keeping on top of these changes can help you avoid costly mistakes and achieve your financial goals.
Preparing for retirement takes consistent saving, prudent investing, and avoiding fees. Whether you’re just starting or close to retirement, these tips can help you make intelligent decisions and get on the right path for your future.