Even though retirement may be years away, planning for this major milestone is one of the most important steps working professionals can take. Once you are no longer working full-time, your finances will become even more crucial to keep track of. If you have a healthy financial mindset, you’ll likely be in a better position to retire when you feel comfortable — rather than working as long as possible to save money.
The question of when you can retire will vary from person to person. To live comfortably, it’s important to think of this chapter in your life well before it approaches so that you have enough time to create a plan and ensure you’re in the best financial position to truly enjoy this new chapter.
As a hard-working professional, you have the power and opportunity to look at your current budget and decide how much you’re able to allocate to your retirement funds and investments. It’s also the ideal opportunity to address any financial concerns you may have.
If you’re unsure where to begin, we’ve put together helpful steps anyone can take to ensure they’re in the best possible position to plan for their future retirement.
Saving Early and Saving Often
When it comes to planning for retirement, there is no such thing as saving too early. It may seem unproductive to plan for something that could still be decades away, but it’s important to think long-term as a working professional.
As with any financial goal, the more you’re able to contribute, the more benefits you’ll reap. When thinking of retirement, you want to try and envision your life in those years — and the more money you’re able to contribute, the more you’ll be able to enjoy your post-work life.
Every dollar you can contribute now will benefit you in the future, even if you’re only able to contribute a small percentage of your current income at this time. Make it a point to include a portion of your earnings in your budget and allocate them to a retirement plan.
Prioritizing Your Retirement Goals
Every budgeter is different and has unique financial goals. This is important to keep in mind when envisioning your retirement. It’s tempting to look at how others choose to save and spend their money and copy their behavior, but it’s important to understand that you have the freedom to choose how you want to spend your retirement.
When it comes to your retirement goals, it’s about prioritizing — envisioning your years when you’re no longer working and deciding how you want to spend your money. Knowing the general trajectory, you plan on going will help you plan your current budget accordingly.
If you’re an avid traveller and don’t plan on giving up that lifestyle when retirement comes, you’ll want to ensure your finances are tailored to fit those goals. If you’re on the minimalist side, you may wish to allocate more money to investments or a savings account for any children or future beneficiaries. The choice is truly yours.
Clearing Outstanding Debts
If you’re currently dealing with high-interest debts, it’s unlikely you’ve been able to allocate a significant amount of savings to your retirement fund. Debt can take a toll on our financial health and hinder us from making strategic decisions for our futures.
The experts at FlexMoney recommend utilizing convenient alternative loans to alleviate any temporary cash shortages or to consolidate your debts. By consolidating, you can refocus your current budget on a single payment plan. This will then allow you to start from a healthier financial place, so you can get a head start on your retirement plans.
Finding the Right Retirement Fund
Knowing exactly where to invest your retirement money can feel overwhelming, especially if it’s less than a few years away. It’s about finding the right balance and return that best meets your goals.
A total return is a concept that involves placing your money into investments that yield a 10 to 20-year annual return on average. These investments are typically split between bonds, stocks, and physical cash.
There is also the option of annuities, which are a type of investment. In this case, you would give a lump sum to the annuity provider, and they would agree to give you back a specific amount of income at designated times. This option can be helpful if you have a large sum of money that you’ve saved but are unsure how to make it last the next two decades after retirement and potentially beyond.
If you have the luxury to do so in the present, purchasing real estate is also an innovative way to build equity and additional income. Once you hit retirement, you could sell your property for a profit. This may depend on the current seller’s market, but it could be a lucrative option for retirement income with a watchful eye and the ability to rent out the space in the years before selling.
Don’t Forget About Emergencies
The importance of an emergency fund cannot be stressed enough. Taking the time to set aside a portion of your income for potential emergencies is one of the savviest saving decisions you’ll make — because as proactive as we can be, certain expenses can arise and escape our control. Whether it’s a weather-induced flood in the home or a medical emergency, having a set amount of money on hand will ensure you’re not falling into debt trying to remedy the situation.
An emergency fund is essential for retirement since you’ll be living on a reduced income — often a federal monthly payment and, if your current company offers, a professional pension plan. The latter is often a luxury, which is why having a set account for unexpected expenses will help you feel at ease so that you can truly enjoy retirement without the added financial stress.
However you plan on saving for retirement, the point to consider is how important it is to begin thinking of these plans as early as possible. Even as a working professional with the demands of work and home life, if you take the time now to plan for retirement, you’ll be able to truly enjoy your post-work life with your loved ones.