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RETREATING from the 9-5
Planning Your Retirement----Important Considerations
Planning your retirement is vital. Too often people simply do not think ahead regarding their retirement, leaving serious consideration of their Golden Years to tomorrow. Pretty soon, they've run out of "tomorrows," and they find themselves without a solid pension plan and unable to retire comfortably or at all.
This article focuses on ten important areas to consider when it comes to planning your retirement. It's never too early to start putting money away for that time when you want to work less or not at all. And even if you're at the midpoint of your career, you still have plenty of time to supplement your later years.
Retirement Date and Present Age
The first thing you need to determine is when you want to retire and how much time you have to save for it. If you're 22 years old and plan to retire at 67, then you have 45 years to save. You won't necessarily have to be as aggressive in terms of how much money you put aside as someone who is 37 or 47 and wants to retire at the same age.
Commonly, people in the United States retire between the ages of 55 and 65 with the most common age of retirement being 62. When is it too late to invest in your retirement? Some people are able to start a plan just five years prior to their retirement. It's not the best scenario, but with the right investment of cash you can put together something for your retirement. However, the sooner the better.
This is, of course, difficult to predict but the average life expectancy for men and women who reach the age of retirement is 85. If you're retiring at the age of 62, then plan for a retirement that will last at least 25 years. It's best to be on the optimistic side and plan for even a bit more than 25 years.
Present Income Plus Raises
Determine how much you presently make and what sort of raises you can expect. This will give you an idea of what your salary will be around your age of retirement and will help you determine how much money you'll need to realize your plan. You'll want a retirement income of 55% to 80% of your pretax salary at the time of retirement.
Depending upon your age, it's best to save from 10% to 15% of your salary, investing it in a retirement plan. The closer you are to retirement the greater the percentage of your salary you should try to save. Also, saving more will help ensure that you have a chunk of change when it comes to that day you stop working.
Full or Partial Retirement?
Some people simply want to fully retire at a specific age while others, either because they prefer to work or out of economic necessity, partially retire. This is an individual choice that you certainly want to consider when it comes to planning your retirement.
Social Security Benefits and Retirement
Social security, which usually replaces 45% of your income, offers various choices when it comes to retirement—62, 66 or 70 years old. The later you retire the more money you'll collect from social security. You may collect social and still work.
Lifestyle During Retirement
Will your house be paid off by the time you retire? Will your kids be grown and out of the house? Do you want to travel or will you want to stay at home? Do you want to sell your home once you retire and move to another part of the country? How do you plan to handle medical expenses? What sort of expenses can you expect once you retire?
Answering these and other questions will influence how much you need once you stop working. It may also influence whether you fully or partially retire. As mentioned earlier, you'll want your retirement plan to pay you anywhere from 55% to 80% of your pretax work income.
Cash Reserves During Retirement
Along with a steady income stream from your retirement plan and social security, you'll want a certain amount of cash on-hand. How much cash will you want to have access to for medical bills, repairs to your house or vehicle and other such expenses.
Investing in Your Retirement
There are various types of plans that you can chose from, including IRAs, Roth IRAs and 401Ks. There are various tax advantages associated with retirement plans. If you're employed, your employer may offer various types of plans and your employer may even match a percentage of your investment.
In choosing a plan, you want one that has a good performance history and that offers a variety of choices, such as stocks, bonds and an investment option that has a fixed rate of return.
Changing Strategies During Your Retirement
If you're at least 10 to 12 years away from retirement, then an investment strategy that includes an overall aggressive strategy supplemented by some conservative tactics is recommended. How aggressive you want to be depends upon how much of a risk you're willing to take.
If you're within 10 to 12 years of retirement, then you should move around 80% of your retirement money into conservative investments—those that offer a fixed rate of return and aren't tied to stocks. The reason being if you're a decade away from your planned retirement and the stock market drops precipitously and the economy falters, it will be close to impossible to make up for your loses by your planned date of retirement.
Consulting Retirement Experts
It's a good idea to check with people who deal with retirement plans on a daily basis. A financial planner who specializes in retirement plans can be a huge help. Prior to selecting a financial planner you should interview various ones, ask friends or relatives if they have any recommendations and perform research regarding their reputation and performance.
A financial planner must be licensed. Make sure the one you go with is or you could be giving your cash away rather than investing it. The U.S. Securities and Exchange Commission offers a wealth of information regarding financial planners. You can access their website at http://www.sec.gov/investor/brokers.htm .
Retirement Planning is up to You
When it comes to planning for your retirement, it's up to you to take the initiative. Use the ten areas outlined in this article to get started towards preparing for your future. It's never too early to start investing for that time you're no longer gainfully employed.