Essential Components of Retirement Planning

By: HCO

There’s a lot to consider when you think about how you’d like to spend your retirement. Creating a plan — and teaming up with experts for advice — will help ensure you’re ready when it’s time to retire.

 Planning for life after work

Retirement should be a time for you. That’s why we all do the work now so we can enjoy every minute later. With some careful planning, you can be sure you’re ready for — and can afford — the life you want to live.

Start with the big picture

Before you get into the weeds of planning, ask yourself some broad but important questions, starting with the most basic question: What do you want out of your retirement? The answer will help you decide where you want to be and what you’d like to do. Maybe retirement is the time to move to that warm, sunny locale you’ve always dreamed of, where you can golf any day of the week. 

Consider when you plan to retire

When you retire is just as important as how you do it. It might seem obvious, but the longer you work, the more money you’ll have. And benefits from the Social Security Administration (SSA) increase the older you are, up to age 70. So then, when you have a potential retirement date in mind, you start the real work…planning your finances. 

Determine how much money you’ll need

Plan for your expenses. How much money will you have, and how much will you spend? Be realistic. You don’t want to retire only to find out you’re spending more than you thought you would. A financial advisor or attorney can help you plan, so you won’t be caught off guard and need to scramble to make ends meet. After all, isn’t retirement supposed to be a break from all that? Get started with a free online calculator and ask yourself a lot of important questions like:

• How will you pay for things? You’ll want to consider all the ways you can earn money. Review your retirement savings and consider how much personal savings you have, what you can expect from Social Security, what your investments or pension will bring in for you each month.
• What will you spend money on? Compare how much you expect to have with what you expect to pay for. That way, you can think about what you’ll need to afford the lifestyle you want. When making your calculations, make sure you plan for prices to go up with inflation, budget for housing and all that comes with it, expect your health to decline (it’s a fact of aging and Medicare doesn’t cover all the bills), set aside extra for emergencies and allow yourself some fun. 

Grow your money now to save for the future

Don’t rely on savings and Social Security alone. Instead, consider other ways you can grow your savings. For example, many employers help employees save for retirement by setting up accounts that employees give to automatically. You might also want to chat with a financial advisor about accounts that can pay off over time.

401(k)s and Individual Retirement Accounts (IRAs)

You put money into these accounts, and the numbers add up over time. Your employer opens a 401(k) retirement savings plan, and you fund it with a bit of your paycheck each month. Often, employers match the money you contribute. Earnings and interest in these accounts grow.

IRAs offer the same tax benefits, but individuals, not employers, set them up. Therefore, you have set aside funds to contribute to your IRA each month. Unfortunately, there’s no employer to match your contribution.

Keep in mind, both 401(k) and IRAs limit how much money you can contribute overall. However, IRAs have a much lower limit than 401(k)s. 

Annuities

With an annuity, you pay a lump sum or make scheduled payments upfront. That money grows tax-deferred, and you receive a fixed income stream during your lifetime or for a defined time. Though you pay taxes on the earnings once you begin receiving payments, annuities are a great source of reliable income that can last throughout your retirement. 

Health Savings Accounts (HSAs) 

Set up individually or through your employer, with an HSA, you put aside money before taxes to help pay for approved medical expenses, including deductibles, Medicare premiums and nursing home bills. The best thing about HSAs? That money builds on itself year after year, so you have more money to spend on health costs in the future. And the interest gained on HSAs is non-taxable. 

Learn more about estate planning

There comes a point when you’re no longer able to make sound decisions about your health or your finances. That’s when estate planning earlier in life comes into play. By preparing for the future, you plan how your wishes will be met. Estate planning can help manage your assets, but it can also influence decisions regarding your health.

Planning today for your life tomorrow

Retirement is meant to be enjoyed, so do all you can to prepare for it. A little research and financial experts can help you learn about investment options to help you supplement your savings and Social Security benefits. Then you can enjoy your retirement long into the future.