Leaving full time employment is a great opportunity – it is the great beginning, not the end. If you have spent your working years fulfilling obligations, paying the bills, and raising children, retirement could be a chance for you to pursue some life goals as an individual. It could be anything from organizing family albums, growing a garden, to traveling.
Some people go into retirement thrilled to get started with what they want to do. Others don’t really look that far into the future. Even if you do not yet have a clear picture of how you would spend your retirement years, it’s never too early to start preparing for it.
Ideally, we could take a hard look at our finances, assess our current position and picture the lifestyle we want to maintain upon retirement. In reality, retirement planning simply takes a back seat to the present, more urgent obligations, and years go by this way before we know it. Take the following suggestions not as hard and fast rules, but flexible guidelines to get you started even without the perfect plan.
When to retire?
At what age will you retire, and what is your age today? This should give you a definite number of years ahead to give you a picture of how long you really have to prepare for retirement. You can set small goals you can achieve every year. Stick to your goals despite the challenges of significant milestones in life which may not be in your plans now, like getting married or a career shift.
If you are dreaming of an early retirement so you can have more time for your bucket list, this will shorten the number of years you have to prepare, so adjust your plans accordingly.
Set aside 10% to 15% of your income for your retirement fund
If you are starting at a later age, 15% may not be enough to build a nest egg in time for your retirement, but it’s better than setting aside nothing at all. Keep in mind that your retirement fund and your emergency fund have very distinct purposes. If you find yourself dipping into your retirement fund for emergencies, try to build an emergency fund that would meet your needs first.
Once your children leave the nest, is your house too big for your needs? If you leave in the busy suburbs, would you want to move to a quieter place for a more laid back lifestyle for your retirement? If you plan to move after your retirement, scout for properties in your preferred area and incorporate the amount in your retirement fund.
If you want to take it a step further, you can invest in the property and rent it out to earn you extra income before your retirement.
Higher healthcare costs
Aside from maintaining your current lifestyle and entertainment costs, remember that you will be incurring costs for healthcare, too. Even if you feel as fit as a horse today, incorporate healthcare costs in estimating how much money you’ll need in your retirement years.
Of course, it would never hurt to take care of your health today. Healthy food choices and regular exercise might save you a ton of medical expenses in old age and give you better health and quality of life.
Inquire about your employer’s retirement benefits
Different companies may offer different retirement benefits. Take a trip to your employer’s HR department to ask about them. Your company may provide excellent pay but little retirement benefits. If you feel that your company is offering too little, you may consider switching to another company if your career goals can accommodate it. Otherwise, you may need to stash away more for your retirement fund to compensate.
Review your retirement plan every 3 to 5 years
A lot can happen within 3 to 5 years, and your lifestyle and bucket list may change. Checking your progress against your retirement planning goals every 3 to 5 years will keep you on track and alert you if you need to adjust your goals.
Retirement planning does not have to be a daunting task, but do not procrastinate it either. Start early with small, steady steps until it becomes a habit and you’ll have a stress-free, secured retirement.