What is your idea of retirement? Gardening or sipping hot coffee while you sit by your beachside house. Or for some, it is to open a little restaurant in their hometowns and spend the rest of their lives in the place they grew up. While retirement may be ages from now, but the process of transitioning from the working life to the retirement life takes a lot financial planning and careful decision making. Here are some basic tips to start with:
- Open a savings account
If you don’t have it already, you need to go down to your bank today. Make saving a habit and stick to your goals. You can also set yourself up with automatic paycheck deductions so that a part of your monthly salary goes into your savings account every month without you having to put it the extra efforts of convincing yourself to save. Aim at saving at least 10% of your gross income. Savings grow over time, so if you are thinking you will that for later, you would be left with chaos trying to catch up in the last few years of retirement.
- Know when to collect your Social Security Benefits
Don’t start collecting social security benefits until absolutely necessary. Try to delay these benefits until the year you retire, to receive a larger monthly check. If you have thought over delaying your benefits, make sure you sign up for medical benefits within three months of your 65th birthday, since the medical services get expensive if delayed.
- Contribute to an employee’s retirement saving plan
Most employers offer a 401(k) plan, if your company has such policy sign up for it. Apart from the fact that you’ll be saving so much, the plan also benefits you with lower taxes, and automatic deductions make it easier. Over years the compound interests and the tax deductions make a big difference in the money you will end up with. You’ve to reach an age of 59 or 60 to tap your company’s 401k plan, but it always advisable to leave the money as it is for a longer period of time so that the money keeps growing. You can also covert your 401k funds to Roth to avoid hefty taxes, and so that you don’t have to withdraw the whole amount at your 70th
- Start working on a budget and avoid debts
Figure out how much your retirement lifestyle will cost you, and according to your current income, see if you have to save more, cut spendings, or boost your income.
Ideally you need to pay off all your debts before retirement.
- Review your will and insurance needs
Health and life insurance needs change as you grow old. Make sure you have enough insurance to meet any long-term health issues or emergency health problems.
Don’t touch your retirement savings, and ponder over your hobbies and interests that you can pursue once you are retired. Your goal is to recreate a life with the background conditions where you’ll have a lot of time to spend, but with lesser money.