Planning for retirement is important but often completely ignored. Ideally you should have started your retirement planning in yout twenties ... but rather late than never!
What will you do now? For example if you have a mortgage loan then you should carefully consider whether you should pay it off before you begin saving for retirement or whether you should use the low cost mortgage finance for other investments.
If you pay off the mortgage, then you'll be debt free, freed of the stress of paying a monthly mortgage payment and there will no longer be a drag on your cash flow after you retire.
However, if you invest that money in your retirement fund, then you can benefit from the deferred tax return of these investments. Your mortage is paid with after tax money and your retirement benefit with deferred tax funds.
So you should consider your own personal situation. What will suit you best? You may also opt for loan modification if you need the cash and want to reduce the current payments.
Planning for Retirement - The 5 Tips
1. Plan for Health Care Costs
Health care is very expensive (especially in the US) and as you age physical problems start getting worse. If you are only planning in terms of to your current health, then you could be making a big mistake.
That is because after you retire, as the years of neglect and misuse start to take effect, the chances are that you will need more medical care. In addition don't overlook the chance of unexpected health issues.
Thus, you should plan for your health after retirement and carefully calculate the medical expenses that you might need.
2. Consider Two Stages of Planning for Retirement
The two stages of retirement are the periods before and after 65.
Your first concern should be to safeguard the period after 65 with various sorts of investments. These will include investments such as 401(k' s, pensions, annuities, individual retirement accounts and savings.
However, in case you want to take an early retirement, then you also have to consider funding the period before you turn 65.
In this case you should try to find out what assets you have that generate income. You should try to invest a lot more and also invest in places where the returns will meet your requirements.
3. Reviewing Your Assets
Find out exactly what assets you own that will be available for use to you after retirement. In this calculation you may include your home, your savings, your vehicles, vacation homes and your current investment. Also calculate all social security and company pensions if your company provides you with any.
4. Calculate Your Investment Risk Tolerance
Carefully consider the amount of risk you are able to tolerate. The amount of risk that you can tolerate in exchange for a higher possible return is your risk tolerance.
Generally the the older you get the lower your risk tolerance as you do not have the benefit of time to recover from losses. Thus, you risk tolerance will be higher if you begin your retirement planning really early. So you should begin planning for your retirement as early as possible.
5. Develop a Savings Strategy
You should realize that you'll not be able to retire on your social security and your pension alone. Planning for retirement should include extra savings for unexpected events. So build this into your retirement savings strategy.
You should aim to save at least 10% of your current income; you should also try to save on every day expenses so that you can put in more towards your retirement nest egg. Or set up a small side line business that will boost your retirement income.
So just a few more issues that you should consider in your planning for retirement.
Retirement Planner: Start yours today, it's the first step to a successful retirement.
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