Best Way to Prepare Yourself for Retirement
The days when you could take up a job with a company, work for 20 or 25 years, and retire with a pension and benefits from Social Security are things that only the old-timers can remember. The commitment they made to their company and the years of hard work usually paid off with a generous pension, The pension often helps them manage their needs during retirement.
Those days have long gone past and have been replaced by corporate pension plans that can take care of your retirement needs. They have now been replaced by defined benefit plans where contributions need to be made to 401(k). The changes cannot be considered as bad but they have definitely shifted the responsibility of preparing for your retirement on you the employee rather than your employer. Therefore you should be trying to prepare for your retirement well in advance. You wouldn’t want to be caught off-guard when the moment to retire eventually arrives. What are the best ways to prepare yourself for retirement?
Picture Your Retirement
You cannot believe retirement planning is simply because not everyone will have similar requirements. If you want to know what you will need after you retire it will be essential for you to picture your retirement. Would you like to retire in suburban areas or want to stay back in your hometown? Do you have plans to travel across the world or do you prefer to confine yourself to your local settings? Prepare a wish list along with your spouse to figure out the ideal retirement for either of you.
Retirement Planning Should Be Extended
Lifestyles have changed and healthcare has also advanced and people are living longer lives. If you intend to retire at the age of 65 you can expect to live for an additional 25 to 30 years. This clearly means you will be spending approximately the same time in your retirement as you did in your career when you started working at 21. If you do not plan for an extended retirement you could well fall short of leading a comfortable life.
Evaluate Your Expenses
You would have been accustomed to unexpected expenses during your working years. You would’ve also dealt with problems like braces for the children, broken car, repairs for the house, etc. These unexpected expenses will no longer be an issue when you retire but it in no way means you should not be planning for other expenses. It is extremely important for you to identify and understand how expenses can impact your retirement by also considering health care costs, inflation, and taxes.
Identify Your Sources Of Income
You will no longer be receiving paychecks when you retire and therefore you need to rely on income sources of other types. You can consider part-time work, your investment accounts, pension and Social Security. You will also need to understand your options about the accounts you will be tapping into for the income you need. Your individual circumstances will present a number of options to you along with a set of pros and cons which you must consider before arriving at any decision.
Prepare An Investment Strategy
Retirement planning can be divided into two stages with the first being accumulation and the second being distribution. These are entirely different and therefore need to be managed effectively. During the accumulation stage which will be the time when you are working you should be aggressive in allocating your investments and enhancing your portfolio.
Your investment strategy can change after you decide to retire because you may not be able to afford market corrections of the massive kind and may be less prepared for the risks than earlier. You must develop a strategy to make the changes that will suit your requirements along with your expectations.
When you decide to retire the circumstances you are facing will undergo changes and you will also be faced with challenges. However, if you have prepared yourself for retirement from an early stage you should be in a position to handle the challenges without major concerns.
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