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Retirement is a difficult thing, one day you feel good about it because you will be relaxing, and another day you feel worried about your finances. But those who plan their retirement well in advance may have little or nothing to worry about.
Retirement planning is an ongoing process, and you have to try to anticipate things. However, no one can predict everything and it would be better if trying to get closer could be of some use.
Many people are very scared of retiring because they are worried about how things will be when they draw down that income. However, retirement planning is not a hard science and following these 7 steps can help you secure your future.
1. Retirement Planning – Assess Your Financial Situation
First, make a list of all your current assets, liabilities, income and expenses. You can sit down with your retirement planner and estimate what your responsibilities and expenses will be. When you retire, some expenses may remain the same, such as groceries and insurance, among others.
However, some expenses may increase such as travel expenses, vacation expenses, and less expenses for growing children. Some of the expenses will also be met by pensions and social security. Highlight your concerns and questions that bother you at night and discuss them with your planner.
2. Calculate the value of your assets and liabilities
Here are some tips on how to calculate the value of your current property.
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Write down the current amount in each of your accounts where you keep cash and liquid savings. These include checking, savings and money market accounts and certificates of deposit.
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If you have savings bonds, calculate and determine the present value or call the bank to find out the present value.
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Call your agent and also know the cost of your whole life policy.
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If you have investments in stocks, bonds or mutual funds, check the value on financial websites or from your past statements.
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Use the current value of your home and other real conditions.
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Take into account the present value of your pensions, IRAs, or other retirement plans. Try to know the value if you decide to cash them today.
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Also take into account other assets such as businesses and rental properties.
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The mortgage balance on your home is a monthly liability.
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Also take into account any other mortgages or home equity loans.
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Record outstanding balances on credit cards, installments, loans and investment accounts.
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Make a list of all current and overdue bills that you owe. These include utility bills, doctor, dentist, telephone, water, gas, property taxes, etc.
3. Know what you want
We all want so much that we entangle ourselves in so many things. Make a list of things that you think your lifestyle should be after your retirement. Consider everything that may seem small to you so that you are prepared for it.
Do you know how much money you will need to retire and live comfortably?
Well, research says you need to replace 70-90 percent of your pre-retirement income. It helps you estimate your target based on your current income. This is a rough estimate though, and keeping this in mind can help you stay on track. Keeping up with factors like vacation habits, medical expenses, house rent will have a substantial impact on how much you need to save.
If you can save the right amount for retirement, you will have the options to live the life you want. Proper retirement planning lets you overcome any hurdles and obstacles, and add to the leisure of the golden retirement period. You may even have enough to leave something for your next generation. Don’t be afraid to aim high!
4. Cash Flow Planning
Present value is important for your retirement planning. This is the amount of money you need in your account today to plan and save for your future. Many people work with their financial advisors or their retirement planners to set up individual retirement accounts to prepare for their retirement. You can do this while planning before and after retirement.
planning before retirement
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Budget
It is almost impossible to start any retirement planning without a budget. Your budget is an essential part of your cash flow plan both before and during retirement. This is an essential analysis that you must do to determine how much cash is needed to maintain the lifestyle you and your family are used to living.
Once your budget is created, it should be reviewed annually to determine whether additions and subtractions are changing the planned budget or if any other adjustments are needed. A budget will also help protect your long-term and retirement savings.
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emergency fund
Let’s face it, unexpected financial problems can arise at any time, and they aren’t always easy to avoid. Hence, it is always a good idea to have some savings with us to help you with your inevitable needs.
Your emergency fund should be set aside in a liquid manner as you never know at what time or situation you may need it. The total amount should be decided by you and your family, and should be within your comfort level. Some may agree to having $10,000 or $20,000, while others may want to have more for their emergency fund.
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risk management
One area that is often overlooked in retirement planning is risk management. People usually focus on saving money for retirement. However, they forget to keep risk management in their mind. Risk management includes car insurance, home insurance, short term and long term disability and health insurance. You need to have policies about these and should be monitored, reviewed and updated as needed.
planning during retirement
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Budget
During retirement, your planning should again begin with budgeting. Your income will change after retirement, so it is important to keep an eye on your cash flow during retirement.
Budgeting after retirement isn’t just about controlling cash flow. In fact, it also involves analyzing all your expenses over the year. This lets you identify places where you can use other or less expensive options or how to plan for significant expenditures.
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taxes
Tax planning is a big test for some retirees. Makes a lot of plans regarding the analysis of the sources of money. This allows you to maintain your lifestyle and therefore takes care of your tax consequences.
Funding or withdrawing from different types of accounts has different tax consequences. Retirement savings or qualified accounts are taxed at the ordinary income level. Non-qualified accounts are taxed at capital gains levels.
When specific funds are needed to maintain a lifestyle during retirement, keeping up with the tax consequences of the accounts funding your retirement is essential.
Taxes should not be the only consideration when planning for your retirement. Instead, it should be tied to other aspects of your overall financial plan.
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estate planning
While estate planning is an important component required before retirement, post-retirement planning has a more important role in managing real estate. It is essential for you to determine what you and your family are willing to compromise on.
What is important is that your approach to wealth planning should be similar to your approach to risk management. Your estate plan should be reviewed and updated regularly.
5. Invest or Save
It’s perfectly fine if you start late too. The key to expecting success is a positive attitude and understanding that starting late is better than never starting!
If you’re over 55, the Government offers savings on catch-up contributions to help you save a little more. Sometimes, chances are that a savings account and employee pension just aren’t enough to reach your goals. That’s when you figure out investment products.
It is always good to invest in your favor if you are planning to upgrade your standard of living and stay financially strong for a long time. There are many different ways to save your money, but IRA accounts have proven to be the best. If you don’t know about it yet, search the mighty Internet for guidance.
Build a diversified portfolio of savings accounts, investments, stocks, bonds, property and insurance that can all contribute to making you profit.
6. Create Strategies to Maximize Your Social Security Income
Social Security is likely to remain an essential part of your retirement planning, and maximizing this benefit is essential.
To maximize Social Security’s benefits, you’ll need to sit down with your retirement planner and create effective strategies for collecting Social Security. The age at which you decide to withdraw your money also affects your lifetime savings. You can start receiving at age 62. Plus, the longer you wait, the more you get paid. If you wait until age 70, your payout will increase by 77%.
Another important thing that you should be aware of is whether you are eligible for more than just your own retirement benefits! If you are married, divorced or widowed, you may also be eligible to claim “spouse” or “survivors” benefits. However, these are based on your record with your spouse, whether they are dead or alive.
Remember not to file for two or more types of benefits at once. If you file for both at the same time, chances are you will lose one of them. Build a strategy to claim the smaller ones first and the larger ones later.
Social Security uses the best 35 years of your working life to calculate your monthly earnings. If you have worked for less than 35 years then you should keep working. Since this will also help you combat some of your low earning years.
7. Check and Repeat
The most important thing to keep in mind while planning for retirement is to focus on your savings. It needs to be updated and changed as needed. Review your retirement plan annually. Nothing is set in stone and with a strong and steady plan you are well on your way to leading a happy retired life. All you have to do is position yourself to be successful and organized.
Retirement is a life changing process. Like other major life changes, retirement requires you to adapt and grow. This may include some sad moments for you like leaving your workplace, co-workers, changing homes, ups and downs, lack of money etc.
However, these sad moments don’t last forever! Your efforts to lead a balanced life before and during retirement will help ensure that your retirement is a smooth and painless process.
Although the sannyas action takes place in a day, or a week. In fact, the retirement process is taking place years before your actual departure. Retirement is not an overnight success and requires thorough planning and preparation. Your retirement plan may change at certain points in life, depending on your interests, activities and fluctuations in health.
Trust yourself that you will adjust to retirement, relax and enjoy it!
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