Start at the End
Firstly, what are you planning for retired life and how much will you need? While some want to travel the world, others want a small home with their loved one. Once you know EXACTLY what you want, all your decisions can be based around this.
At this stage, we should point out that expenses can increase during retirement. While common misconceptions will tell you it’s the opposite, we don’t believe anybody should attempt to live without an emergency fund.
Sadly, even Medicare has its limitations so medical expenses are a perfect example of how costs can rise. Elsewhere, you might need a fund for a nursing home. If you’re not sure how to start with all these provisions, a professional financial planner can offer tailored advice.
Multiply by 25
If you’re looking for a savings goal, many financial planners will tell you to multiply your projected average yearly spend by 25. Rather than worrying about income, this is a great way to consider projected annuities, Social Security payments, pensions, and more.
Rather than suggesting that you will have 25 years of retirement, the idea is to cover all expenses with 4% distributions. For the rest of the money, this is still invested and brings a nice return each year. Ultimately, the aim is to create a sustainable plan where returns cover distributions and you have income for the rest of your life (and an estate for loved ones!).
With constant political instability, market volatility, and low interest rates, building a reliable retirement plan can be difficult today. For many financial planners, they focus on either insurance or the market. For us, we believe a broader approach is required; security is achieved with a tailored and diversified plan.
Reaching Your Savings Goal – Advice
With this, it leaves one question – how do you build a retirement fund that generates the returns required to cover distributions? Yes, this will take some time, it won’t be something you can create overnight. However, the fact that you’re reading this is a great step. The earlier you start, the more you can take advantage of compound interest.
Here’s some other tips you can utilize:
- Contribute to your IRA, 401(k), Roth IRA, and/or Roth 401(k)
- Seek impartial advice and diversify your investment portfolio
- Always pay yourself first
- Do your best to avoid credit cards and other high-interest debt sources
- Save as much as you can as early as possible (up to 20% of your income with employer match)
- Always use your investment accounts through the rough times and the smooth
Get Started Today
Although we’ve focused heavily on retirement today, you should know that a financial planner (or financial planning in general) can help with ALL areas of life. If you can introduce a carefully considered plan, your family will have the right tools to adjust whenever required. Whether it’s a death, birth, redundancy, or serious injury, your family can adjust and thrive financially.
With your own plan, it needs to consider all financial resources and it needs to evolve over time. As you have children, change careers, move home, and go through other changes, your financial plan should change too. Thankfully, there are some brilliant financial planners who can keep you and your family on the right path to success!