What Is Retirement Planning?
Retirement planning involves an analysis of the various choices you can make today to help provide for your financial future. To make appropriate choices, you’ll need to predict your future economic circumstances as well as you can. You’ll also need to establish your post-retirement goals. Once you’ve determined how much of an income stream you’re likely require in the future, you’ll be in a position to make wise choices now about income, saving, investments, and employer-sponsored (or other) retirement plans.
Of course, you’ll need to tailor your retirement planning to your own unique circumstances, as planning methods may differ from employees to executives to business owners. And no matter who you are, you’ll probably want to gain some familiarity with the Social Security system as well as post-retirement healthcare insurance coverage.
For some people, retirement may be an eagerly anticipated event. For them, it is seen as an opportunity to enjoy so many things that working may have gotten in the way of, such as travel, hobbies, and more family time. For other people, even the word “retirement” may conjure up feelings of fear or dread, particularly for those employees who work without the benefit of a pension or other retirement plan. News articles predicting the collapse of the Social Security system can certainly compound anxiety too. Whether you are financially comfortable or of limited means, you need to know that retirement planning is possible and can help you take control of your future.
How to Determine Your Retirement Income Needs
To determine your retirement income needs, you’ll want to evaluate your present circumstances, including your income, expenses, assets, and debts. Next, you’ll need to think about your future circumstances. There are four main sources for your retirement income: Social Security, pensions or other retirement vehicles, your investment portfolio, and savings. If you predict that your current income will not provide you with your desired retirement lifestyle, there are steps you can take now to help change your circumstances.
You’ll want to think about your future sources of income but also about where you’ll live. Will you continue to live in your current home, or will you move to a condominium or retirement community? If your employer typically provides early retirement packages to its employees, you’ll need to know how to evaluate such packages from a number of perspectives.
Calculate the Gap
Once you have estimated your retirement income needs, take stock of your estimated future assets and income. These may come from Social Security, a retirement plan at work, a part-time job, or other sources. If estimates show that your future assets and income will fall short of what you need, the rest will have to come from additional personal retirement savings.
How to Save for Retirement
Learning how to save for retirement is imperative. There are a number of retirement vehicles available, including traditional and Roth IRAs, employer-sponsored retirement plans, non-qualified deferred compensation plans, stock plans, and commercial annuities. Proper retirement planning requires an understanding of the workings of these tools.
In addition, your personal investment planning can help you on the road toward your retirement goals. The sooner you start, the longer you will have to accumulate funds for retirement.
Get Help From a Trusted Professional
There are many factors to consider when addressing retirement planning. In addition to the above, you’ll also want to understand your investment options, the taxation of your retirement and investment vehicles, and much more. A wealth advisor can help you with these matters as well as provide strategies for handling the competing demands of educating your children and retiring. If you’re in need of retirement planning and want to see how well positioned your portfolio is to meet your goals, give us a call. Our team of CERTIFIED FINANCIAL PLANNER™ professionals can help.