How to Retire Comfortably
To retire comfortably, it’s necessary to set aside enough funds for your expenses. But this amount varies from person to person.
One important consideration when saving is inflation. Over time, prices increase, meaning your money won’t stretch as far when deposited.
1. Set financial goals for retirement.
Setting financial goals is an integral part of planning for retirement, yet it can be a challenging endeavor. Many factors will play a part in how much money you need during this phase, including expenses expected during retirement, savings contributions and Social Security payments.
Setting realistic financial goals that align with your personal retirement aspirations is key. This includes deciding when you want to retire and how your lifestyle might change upon reaching this stage in life. Furthermore, other expenses, like travel and healthcare costs may rise or decline depending on individual needs.
Many people follow a rule-of-thumb that recommends saving enough to replace 60-100% of pre-retirement income, though this varies by individual and is only meant as a general guideline that may or may not apply in all situations.
2. Create a budget and track your spending.
Create a budget is an effective way of understanding your monthly expenses. Start by listing your regular bills and any extra costs you might incur such as entertainment or dining out, such as entertainment tickets. Divide spending up into categories like “needs,” “wants,” and debt repayment (including minimum payment for credit cards).
Take into account any possible lifestyle adjustments. For instance, many retirees wish to travel during retirement; however, extensive travel could quickly deplete savings and make enjoying golden years difficult.
Medical expenses tend to increase as we get older, making a plan for meeting them crucial. That is why some retirees choose part-time work or alternative sources of income such as rental properties as an avenue to help cover these expenses.
3. Save money early and often.
Save as much of your money as possible and start early; every dollar saved sooner will become worth more in retirement due to compound interest.
By age 67, you should aim to save 10 times your preretirement income in savings accounts; however, your exact needs may depend on lifestyle preferences, inflation rates and investment returns.
SmartAsset estimates that to maintain 70% of your preretirement salary in retirement, you’ll require approximately $1.3 million in total income sources such as Social Security benefits, investments in workplace savings accounts and personal savings accounts, personal retirement plans, annuities, rental income or other sources.
4. Invest your money wisely.
If you wish to retire comfortably, saving more and investing wisely are necessary steps. How much you’ll need depends on your retirement goals, inflationary trends and lifespan – among other considerations.
Advisors typically advise setting aside at least 15% of your pretax income (which includes employer contributions to your 401(k) or IRA) in savings over time. You don’t need to save this entire sum right away; try gradually increasing your savings rate over time.
Saving is key for weathering stock market downturns and outpacing inflation; with each passing year, investing in growth-oriented assets becomes even more essential to creating an income in retirement. When approaching retirement age, it may be prudent to gradually diversify away from riskier assets toward bonds or less volatile securities.
5. Plan for your healthcare/longterm care needs.
An enjoyable retirement requires more than saving money alone; many other considerations must also be taken into account, including your desired lifestyle, living expenses, annual raises, inflation rates and investment portfolio performance.
One key consideration when setting aside money is healthcare and long-term care expenses. They can quickly deplete savings accounts, so it is wise to plan ahead by allocating enough funds.
Though there may be an ideal figure that defines your retirement income needs, it is wise to customize a retirement plan around your personal needs and objectives. Speaking to an independent financial adviser is an effective way to determine how best to invest your savings and achieve your desired goals.