There’s no such thing as a perfect time to start planning for your retirement, but the short answer is to do it as soon as you can. This is because you’ll need to have ample time to build your nest egg, especially since life is all too fleeting. One moment, you’re just starting your first job, and the next, a decade has already flown past you.
If you keep pushing the planning to a later time, there’s a big chance that you’ll forget to do it until you only have a few years left until your retirement age. That’s why you should do it as early as now when you still have a good decade or two before you leave the workforce permanently. That way, you’ll have enough funds to lean on for the remainder of your life.
Of course, this is much easier said than done. It’s one thing to have a plan for your retirement, but it’s a completely different matter altogether when you’re putting that plan to action. So, it’s all about setting your priorities straight and figuring out what it is that you want to get during your retirement age.
A good retirement plan is different for everyone. For one person, it could simply be having enough money so that they can afford to travel the world and enjoy their lives for as long as they can. But for others, it could be wanting to leave a sizable inheritance to their children and grandchildren. Here’s how you can start planning for your retirement:
Step 1: Define Your Financial Goals
Before you can create your retirement plan, the very first thing you have to do is create a list of financial goals that you’ll be working toward. There can be a lot of factors that will come into play when making your goals, such as your current age, health status, the target age for retirement, projected income, and average expenses.
Defining your financial goals from the get-go will help you grasp how much money you’ll need to set aside every month for your nest egg until you reach your retirement age. This will give you enough time to plan your retirement, think of how to increase your income sources, and find out where to invest your money.
Step 2: Consider Their Feasibility
After you’ve created your financial goals, the next step is to take their feasibility into account. Of course, the sky is the limit for your dreams and aspirations, but when it comes to money, you’ll have to set realistic goals. This way, you won’t get too disappointed if you can’t achieve the goals you’ve set for yourself.
It’s also important to consider that the value of your money now may increase or decrease in the next few decades. So it might not be practical to depend on your 401(k) or Roth IRA alone for your retirement plan. Take the time to consult financial advisors about your plans and seek advice on how you can realize those plans.
Step 3: Look into Estate Planning
You don’t have to be a high-net-worth individual or a business tycoon to protect your assets and grow your wealth. Estate planning is something that everyone can benefit from, especially if you’re only beginning to grow your assets. This means that you can stay one step ahead of your retirement plan and work toward it.
Of course, this may be too difficult to do on your own, so it might be best to work with estate planners who have the experience to guide you through your retirement journey. This way, you’ll be able to receive the proper guidance when it comes to creating your will, trusts, health directives, and other legal documents needed for retirement.
Step 4: Research Your Investment Options
One of the biggest benefits of starting your retirement planning early is that you’ll have more time to grow your wealth. This is because of compounding interest—which is just earning interest on interest. For example, with $1,000 on a 3% annual interest, you can earn $30 from your initial investment.
Then the next year, you’ll earn 3% of $1,030, which means you’ll earn $30.90 even without doing anything. Now imagine investing more money into your retirement account every year and taking advantage of this compounding interest. And because you’re still young, you can invest in higher-risk stocks or bonds, which means you can enjoy the potential of higher returns.
Planning for your retirement may be the last thing on your mind right now as you’re still trying to find your place in the workforce and pay your student debt, but it should be the next in line with your priorities. Your retirement age may still be far away, but the years can fly by quickly. So, it’s best to get started on your retirement plan as soon as possible.