Plan for Your Retirement

Would you go on vacation without planning what clothes to wear, what kinds of items to bring, and how much money you will spend? Of course not! So why would you retire without knowing how much money you'll need to live the lifestyle you want? Planning for retirement can be intimidating, and unfortunately many employees don't put much thought to it until it's almost too late.

Of course, one of the most important things about retiring well is to start planning early. The longer you have to save and the longer your savings gains interest, the more money you'll have to retire with.

1. First, you need to determine what kind of lifestyle you want when you retire. Do you want to take things easy and garden, or travel the world? Everyone has a different dream for his or her retirement.
2. Next, try to determine how much money you will need in order to have that lifestyle. Thanks to medical advances, today the average person will spend as many years in retirement as they spent working, so you'll want to plan on living on a fixed income for 30 or 40 years. Decide how much money you need to contribute on a monthly basis to your employer's 401(k) or your IRA, and begin contributing right away. Talk to your employer to find out about 401(k) benefits they may offer; many employers will match your 401(K) contributions up to a certain percentage.
3. Don't forget to include your social security benefits and pension, if you have one. It's also important to account for inflation when determining your retirement income needs. While inflation has typically averaged just over 3% annually, it's wise to plan for 4% to prevent shortfalls. There are numerous free calculators available online that can be useful in calculating your retirement income needs, including inflation and typical investment returns.
4. Now that you're regularly putting aside money for retirement, it's time to take a look at your major debts: mortgages, loans, or high-interest credit cards. Your plan should be to pay these off quickly, starting with those debts that have the highest interest rates. Put as much money towards your debts as you can in order to minimize your liabilities during retirement.

Lastly, don't be afraid to ask for help. A Certified Financial Planner can help you understand your investment options, ways to safeguard your retirement savings, and the risks involved with investing.