Live Long and Prosper - How to Plan for Retirement Like You Mean It

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We often hear that many Americans are worried about retirement.

With over 30 percent of Americans with less than $5,000 saved for retirement, it's not hard to see why people are concerned.

But it's never too early or too late to start planning for your financial future. You need to follow our tips on planning for your retirement.

By planning for your retirement with plenty of time to spare, you can ensure that you live long and prosper after your working life. Keep reading to discover how to plan for retirement.

1. Don't Get Overwhelmed by the High Sums

How much money do you need to save for retirement?

You have probably heard the 70 percent figure before. That means you need to have approximately 70 percent of your annual income for retirement.

Once you enter your retirement savings goal in the retirement calculator, you might be in for a shock.

And yet, it's important to look at the bigger picture. Saving for your retirement is a marathon, not a sprint.

You have many years to reach your goal. You just need to make sure you're putting away a little each month.

Plus, even if your retirement goal is more than you could possibly imagine reaching. The closer you get to the goal, the better off you'll be once you retire.

2. Take Advantage of Your Employment 401(k) Plan

Your defined contribution plan means that you can grow your savings tax-free.

If you don't take advantage of the benefits of the 401(k) retirement plan, it's going to be extremely different for you to reach your goal.

While around 80 percent of American workers have the opportunity to take advantage of the 401(k) retirement plan, less than half of them make use of it.

There are few better tax breaks around than this.

The majority of employers match your contributions to the retirement plan, which provides another boost to your retirement savings. However, even if your employer doesn't match it, it's still the best savings plan around.

3. Your Personal Retirement Account

That means that there are many Americans workers who simply don't have the chance to benefit from the 401(k) plan.

There are other things you can do to secure your financial future. Maybe you could invest your money with a mutual fund company? Or perhaps, you could hire a stockbroker to invest for you?

You can also choose between a Roth IRA and a traditional account. The advantages of both are that you can grow your money tax-free. You're permitted to contribute up to $5,500 every year (and $6,500 if you're over 50).

Just because you already have a 401(k) plan, it doesn't mean you can't have an IRA account too. Read more here about your self-directed IRAs.

4. Save as Much as You Can

You need to save as much as you can afford.

The sooner you start with your retirement plan, the better you'll be down the line. You might choose to start with around 3 percent of your income.

But always keep in mind your retirement plan goal. You need to be ambitious with how much you're saving so that you can contribute as much as possible while you're earning a high salary.

Take every opportunity to save a little more. You won't regret when you have financial security in your retirement.

5. Invest in the Stock Market

The number of American households invested in the stock market has fallen by nearly 10 percent over the past decade.

Even though this is understandable since the volatility in the market, it's important to take some risks if you want to thrive financially into old age.

You can't be sure that you'll earn a huge amount by putting your money into the stock market. However, you'll struggle to reach your goal without investing your money in stocks and shares.

Be prepared to invest your money over at least a ten-year period. You have to think long-term about your investments.

6. Think Target Date Funds

Over 60 percent of Americans report feeling scared about investing in the stock market. This is especially true of millennials.

That's why it's always good to keep your investments simple. By choosing a target date fund, you can diversify your portfolio of stocks and bonds.

The target date of the fund allows you to put the money away with a particular date in mind. This depends on when you plan to retire. You might be able to take advantage of target date funds through your 401(k) plan.

7. It Gets Easier Over Time

You're probably more than a little overwhelmed by the prospect of spending the rest of your life saving for retirement.

But it's helpful to think that over time it gets much easier.

After all, as you build up your savings, the growth of your investments increases. Your nest egg will increase in value as time goes on.

8. Avoid Cashing Out on Your 401(k) Plan

Did you know that nearly 50 percent of American workers cash out of the 401(k) plan when they change to a new job?

As a result, they have to pay tax on the money. Plus, they need to pay a penalty of 10 percent of the overall amount to IRS.

This seriously damages the long-term financial prospects of US workers. Maybe you have been saving over $10,000 over a number of years, you could leave your job with only $7,500.

How to Plan for Retirement

Now you know how to plan for retirement, you can get started with securing your financial future.

It doesn't matter whether you're in your twenties planning for the distant future, or in your fifties thinking about what's coming round the corner. It's never too late or early to think about your retirement plan.

Do you want to find out more about financial planning? Check out our blog posts on finance and money today!

 

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