For many people, the idea of planning for retirement is at the forefront of their minds. Unfortunately, not everyone properly plans for retirement, and often many of those people find themselves in financial difficulty as they begin to age. However, saving for the future does not have to be an unattainable task. With proper planning and saving, you can prepare yourself for retirement.
If you haven’t already, start saving now! It is never too early to start saving, but starting too late can leave you in serious trouble as you approach retirement age.
Determine what you will need to survive. By estimating what your income and expenses could be, you have a general idea of what you should be planning for.
Think about how much you expect to spend or what would be required to survive each year after retirement. A common starting point is around 80% of your current income. This is because, after retirement, certain financial expenses should end. For example, the cost of travel to and from work, clothes, saving for retirement will no longer be deducted from your monthly income. At this point, there is no need to save for retirement, as you are now using those retirement funds.
Remember economic inflation and prepare for higher cost of living in the future. Plan accordingly, and you can manage these additional costs with your savings. In order to avoid problems, consider saving in excess of the 80% expenditure mark.
This should be rule #1, but sadly many people live above their means, incurring a lot of debt in their lives. This is both, detrimental and short sighted for retirement. Over spending now prevents you from being able to save enough to prepare for retirement.
Avoid overspending during retirement to ensure you will have enough savings for your entire retirement. It is entirely possible for you to exceed your estimated lifespan and it is important to have enough saved to meet that need.
Any unforeseen issue can arise during your life, and in retirement this is no different. Make sure you plan for medical emergencies, housing problems, car trouble and any other event that you can imagine. This way you adequately plan for any circumstance.
It is better to pay off your debts earlier rather than later. If you are stuck managing debt with retirement savings, then it will impact the quality of life that you will have post retirement.
Before you retire, pay off:
It is no secret that as we age, medical expenses become more of a reality. Although you may be healthy and strong now, there is no guarantee that you will stay that way for the duration of your life. As medical costs become increasingly more expensive, it can be difficult to cover those costs without preparation. Take an inventory of family history and personal health history to anticipate ailments that you might experience, then put away savings that can offset the costs of treatment without reducing your quality of life during retirement.
Set a goal and stick to it! Save as much as you can, but at least make your benchmark for saving each month. Meet your financial goals 5 to 10 years before you retire to ensure you have saved enough to last for your entire retirement.
As an experienced small business accounting firm, C.E. Thorn, CPA, PLLC knows the challenges that small business owners face. Our team can help you prepare your taxes to avoid over payment, allowing you to save more for retirement. Give us a call at 919-420-0092 or complete the online contact form to schedule your consultation.