For most people, decades of hard work are rewarded with quiet retirement. Once you’ve settled into retirement, you’ll have all the time in the world to do the things you wish you could when you were still working. The possibilities are endless: You can pick up an old hobby, learn something new, or travel the world. The prospect of having all that free time sounds exciting, but you can only enjoy all of that if you plan your retirement properly.
Wanting to do something is different from preparing for it. Many people buy an insurance plan or start a savings account or an investment portfolio to prepare for their retirement years. Some people go even further and start a business. Whatever method you prefer, it’s best to start early — the longer you wait, the less money you’ll have for your retirement.
Compound interest makes investing in your future easier. You only have to invest small amounts regularly over time instead of dropping a large amount all at once. Here are some tips to help you plan for the retirement you want.
1. Open a separate account
Opening a retirement account is the first step. A savings account does not have the same benefits that a retirement account does, so starting a separate one will ensure that you get the most out of the money you put into the plan.
Another thing to remember: contributions made to a retirement account are tax-deductible. You won’t have to worry about paying taxes on investment income, and sometimes, the money you withdraw from a retirement account will be completely tax-exempt. Timing, again, is everything, so it’s best to start as early as you can.
2. Save regularly
Automating your retirement savings means that you won’t have to remember to manually put money in your account every time you want to grow your retirement fund. Some banks give you the option to set up recurring monthly transfers, saving you the effort to remember another thing to contribute to. As long as your current account has funds, you can “forget” about putting more into your retirement without having to worry about missing a contribution.
Most banks call this a “set and forget” plan, and we advise you to make use of it because it will prove useful in the long run. That’s one less contribution you have to keep track of, as the bank itself does it for you.
3. Your retirement comes first
Sometimes, life sends a few surprises your way, and you end up with extra cash. Whether you get a raise, an inheritance, a cash prize, or even a generous tip, the best decision you can make is to set aside half of that amount and put it in your retirement account.
The amount does not matter, as long as you know you’ve saved half of it. Yes, we know how nice a new car sounds. Buying a new phone also sounds good knowing your wallet is now a little heavier, but think of the comfort your future self will be able to feel a lot sooner. And hey, you still have half of it.
4. Think about your lifestyle
The lifestyle you envision for yourself in retirement will influence how much money you’ll need in your account. The last thing you need is running out of cash a few years into retirement. Do you want to travel a lot and buy a place in every country you visit? Do you want to live in the lap of luxury and bask in your hard work? Or does settling down in a cozy home with a nice garden and maybe some pets sound more ideal?
When you know what you want for your future, you can plan your current budget around the number of contributions you’ll need for it. A simple and comfortable life in senior-living communities will require less investment than a lavish lifestyle. Knowing your ideal life before sunset can help you so much down the line.
A final word
Retirement is an important aspect of one’s life. You want to make the most of your sunset years, and investing in a good retirement plan will make those years rich and full. We hope these four tips help you figure out the right plan for you and motivate you to think more about the future you envision for yourself. You have to budget wisely and remember that time is of the essence.