Planning the path to your retirement years can be a daunting task. The unfortunate reality is that there is no “magic number” that will help you to understand how much money you will need in order to live comfortably and maintain your lifestyle in retirement.
The economic turmoil seen throughout the country in recent years shows that even the most conservative savings plans are not protected from the unexpected shocks that might occur in the financial markets. If we were to see more declines in the stock market or another rise in the country’s unemployment rate, your investments — and your general financial security — could be at risk.
This is why most experts recommend you consult with a financial planner before your enter into your retirement years. Early planning will give you the ability to properly structure your savings. It also gives you the peace of mind that comes with knowing you have prepared for any uncertainty that might come with unexpected events that could negatively influence your personal finances down the line.
Matching Future Income with Future Expenses
At its core, planning for retirement will require you to match your future income with your future expenses. Your financial situation will not be the same as your neighbor across the street — and this can make it difficult to construct a savings plan that will allow you to maintain your current standard of living throughout your retirement years.
Luckily, there are some general guidelines that can be followed which will allow you to ensure that your available income is enough to meet all of your needs.
First, it is important to identify and assess your basic expenses. But this is more difficult than it might seem because these expenses will be changing as you enter each new phase in your life. For example, expenses that are directly linked to your job life (transportation costs, payroll taxes, clothing, meals, parking, etc.) will decrease. Other expenses (such as health care, home maintenance, and travel) will likely begin to rise.
When constructing a retirement budget, it is important to think about which expenses can be cut and which are most essential. It is also important to start thinking about where you can put your savings so that they are secure and can grow in value over time. Some options here include private Individual Retirement Accounts (IRAs), your company’s 401(k) plan, or a diversified mutual fund.
Each of these options carries its own set of advantages and drawbacks, so it is always important to consult a seasoned financial advisor in order to determine which options are best for your unique set of financial goals and plans for retirement.
There are many common mistakes that can be made when people start (or fail to start) planning for retirement. The good news is that these mistakes are avoidable if you are able to construct a plan to grow your savings and accurately assess your financial needs once you stop working.
The sooner you get started, the easier it will be to ensure your financial goals are attainable. Without this planning, you are rolling the dice and taking big risks with your financial future.
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All content is for information purposes only. It is not intended to provide any tax or legal advice or provide the basis for any financial decisions. Opinions expressed herein are solely those of Advanced Wealth and Retirement Planning Concepts, LLC and our editorial staff. Material presented is believed to be from reliable sources; however, we make no representations as to its accuracy or completeness. All information and ideas should be discussed in detail with your individual adviser or qualified professional before making any financial decisions. We are not affiliated with or endorsed by any government agency.