Money is often a tricky aspect to manage throughout all stages of your life. As you grow older and gain more experience in your career path, you may have more financial obligations, such as saving up for your retirement fund.
While you may think retirement is still a few years away, getting a head start on your savings can be a significant boost. Moreover, when you also consider the other benefits you can claim down the road, saving early becomes a must to reach your goals. Learn how you can start and where you can begin below.
How Much Money Do I Need To Retire?
The answer to this largely depends on what lifestyle you want to live when you reach that stage. The more luxurious your needs are, the more you will need to save to span over your remaining lifetime safely. You’ll also need to consider other factors that can happen in the future, like price hikes, market changes, and medical costs.
As a general rule, many plans suggest that your monthly retirement income should be around 70 to 80 percent of what you earned in your last position. This will be enough to cover basic expenses and fulfill any other financial obligations.
Keep in mind all the income sources that can help cover your expenses. As you explore how much money you might need in retirement, remember that the amount you decide to save and invest on your own is only one component of your future retirement income.
Social security will be the majority of Americans’ primary source of retirement income. However, remember that you may have access to other income sources in the future, such as the funds in your personal and workplace retirement accounts, pensions, annuities, proceeds from the sale of your home or business, rental income, and inheritances.
Use the plans discussed above to effectively manage and reduce existing debt so you can live your retirement comfortably.
5 Major Tips and Tricks That Can Help You Financially Prepare For Your Retirement
Retirement planning isn’t always as easy as it seems since you must consider many factors regarding what you want after leaving your last job. While the initial goal is to find ways to save enough money, you can use many strategies. Here are some examples you can try to prepare yourself for your retirement.
1. Get a 401(k)
Look for companies that offer retirement plans like 401(k) or 403(b) to gain benefits and bonuses. Paired with a company match, you should consider contributing up to the maximum amount possible by law. Doing so will help you build up your retirement fund more easily while you gain tax benefits and bonuses from your workplace.
2. Choose the right state to retire in
The tax rules you need to follow may vary depending on where you plan to spend your retirement. In most cases, the government doesn’t tax retirees on their social security, but they do in locations like New Hampshire.
Consider the state income taxes you must pay in other cities, which can largely affect how much you set aside for your retirement funds.
3. Take advantage of self-employed income
Even without working for a company, you can still contribute to your 401(k) plan with your self-employed income. As of 2023, the maximum amount you can contribute is $66,000. But if you’re under 50 years of age, you can contribute up to $22,500. Some people consider getting a side job to simultaneously carry out multiple retirement schemes.
4. Claim more benefits when you’re over 50
Once you’re over 50, the tax system can work more in your favor by increasing contribution limits. In this stage, you can boost your retirement savings and reach your target mark before you turn sixty. You’ll also gain more benefits and bonuses from the government, like an additional amount to your employment-sponsored retirement plan.
5. Invest in a Health Savings Account (HSA)
The cost of healthcare is continuously growing, which can be a problem if you have underlying health problems. But by using an HSA account as part of your retirement planning, you can safely pay for healthcare expenses without dipping too much into your funds. As a bonus, you can use the amount you haven’t used for medical costs to manage your investments.
Make Your Retirement Goals A Reality With A Smart Savings Plan
Many people don’t often consider their retirement plans until they’ve passed their twenties or thirties. But the sooner you take the initiative to save for your future, the more beneficial it can be down the road. Since retirement saving plans take time for them to be successful, you’ll need to come up with a safe strategy that will let you make your money grow.
Investing in a market is one of the most common ways to build retirement wealth. You can also consider reading into different retirement plans that allow you to claim more benefits as you age. Planning and adjusting your goals according to your retirement needs is essential regardless of your choice. You can also seek the guidance of a certified financial advisor to help you along the way.
