Planning for retirement can be intimidating. But one of the worst things you can do is wait until it's too late. Here's some information and resources to help you get started.
Questions to Consider Before You Begin
Begin by asking yourself a few simple questions to help you envision what you want your retirement life to look like. These questions can help you determine what retirement might look like for you:
- Is your home paid for, or will you need to make mortgage payments?
- Do you plan to move?
- Do you plan to work part-time?
- Would you like to take up travel or a hobby, and if so, what are the expenses involved?
- Will you need more or less income than you currently earn?
Once you have established the kind of lifestyle you want in retirement, you can start to figure out what that lifestyle will cost and how much you should start saving and investing to help you accomplish your goals.
How Can You Save for Retirement?
Employer-Sponsored Retirement Savings Plan
If your employer offers a retirement savings plan, it's generally a good idea to sign up and contribute so you at least get the full employer match. That's free money and a great benefit. Many employers match, up to a certain percentage, what you contribute. Taxes aren’t paid until the money is withdrawn from the account. Over time, compound interest and tax deferrals make a big difference in the amount you will accumulate.
Individual Retirement Accounts (IRAs)
IRAs are retirement accounts that offer tax advantages. The most common types of IRAs are the traditional and Roth.
- Traditional IRA: The tax advantage of a traditional IRA is that your contributions are tax-deductible in the year they are made. You will, however, pay taxes when you withdraw.
- Roth IRA: Contributions are made on an after-tax basis. When you withdraw in retirement, you will not be taxed.
Annuities
Annuities are insurance products that pay you income when you retire. The insurance company makes regular payments to you in return for a premium or premiums you have paid. This can provide a steady income stream in retirement.
Building an Investment/Retirement Portfolio
Building a diversified investment portfolio can help you beat inflation and boost your retirement savings. What should you invest in? Only you can answer that, and it may be a good idea to work with a financial planner or investment professional to tailor your investments to your risk tolerance, time horizon, and retirement goals.
Seeking Professional Guidance
Consider working with a certified financial planner to develop a retirement savings plan. Working with a planner can help make sure you are saving and investing enough. They can provide personalized advice and help you navigate retirement planning.