Are You Financially Prepared for Retirement?

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Last Updated on July 30, 2021

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Retirees deserve the peace of mind that comes from being financially secure. Thankfully, by understanding retirement and planning for it, you can have enough money to live securely and enjoy your life. Consider these steps to improve your financial future.

Calculate Your Retirement Needs

The first step to prepare for your future is to have a plan. If you want to maintain your current standard of living, most experts recommend investing enough to ensure an income stream that is 70-90% of your current income. While this is a good starting point, you can calculate a more accurate goal by asking yourself questions such as:

  • When will I retire?
  • What do I want to do once I stop working?
  • Where do I want to live?
  • What medical expenses do I expect?
  • Is long-term care a consideration?

If it’s difficult for you to determine your needs accurately, a financial advisor can help you with all aspects of your financial plan.

Know Your Projected Social Security Benefits

Once you determine how much money you’ll need, the next step is to examine your expected income. For most retirees, Social Security benefits play a large role. You can estimate your expected benefits by visiting the Social Security Administration’s website.

While you can begin receiving benefits as soon as you turn 60, you need to keep in mind that the earlier you start receiving benefits, the lower your monthly payout will be. Since you can increase the monthly payout by waiting longer, many people choose to delay retirement in an effort to earn more income.

Take Advantage of Employer Retirement Plans

If your employer offers a workplace plan like a 401(k), take advantage of it. These plans offer tax benefits because the money is taken from your income before it is taxed. Additionally, many employers offer matching contributions. This is essentially free money, so at a minimum, make sure you invest enough to get the maximum company contribution.

Invest in an Individual Retirement Account

You can also open up an individual retirement account (IRA) through an online brokerage company. You can choose a traditional IRA or a Roth IRA, depending on which tax structure you prefer. 

With either option, you can contribute money to the fund (subject to set contribution limits) and determine how you want that money invested. It would be best if you kept in mind that experts generally recommend more aggressive investments when you are young and more conservative investments when you get closer to retirement.

Don’t Make Withdrawals Before Retiring

When you invest money in a retirement account, it’s best to treat that money as inaccessible. If you withdraw from a retirement account before you are legally qualified to do so, you lose the tax benefits, are forced to pay withdrawal penalties, and can seriously jeopardize your retirement goals.

Planning for retirement can help you stay on track and achieve your goals. Estimate your income needs, figure out your expected income, and make sure you invest enough money to bridge the gap. By being intentional and committed, you can live your later years with the financial freedom you deserve.

My Life, I Guess

My Life, I Guess is a personal finance and career blog by Amanda Kay, an Employment Specialist and older millennial from Ontario, Canada that strives to keep the "person" in personal finance by writing about money, mistakes, and making a living. She focuses on what it’s like being in debt, living paycheck to paycheck, and surviving unemployment while also offering advice and support for others in similar situations - including a FREE library of career & job search resources.

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