5 Essential Steps to Retirement Planning

By Arthur B. — Published February 27, 2018

5 Essential Steps to Retirement Planning

The sooner you start planning for your retirement, the better. Even the small amounts you start putting away from your first job can build up over the years to quite a decent amount. Retirement planning is something that every working person should take seriously. Even retired people need resources to survive and there is nothing like building a nest egg to take the stress off your future self and enjoy your retirement.

Essential steps to retirement planning
1. How much do you need? The first thing you need to do when planning for your retirement is to know how much you are going to need. By calculating how much you spend annually right now, you can gauge how much you will need after retirement. So, if you spend about $100,000 annually now, then you should plan to have about the same amount coming in annually after retirement. You will need to multiply this figure by twenty-five to know how much you will need in the long run.

2. Examine other sources of income: The Social Security website has a tool to help you calculate how much you will get after retirement and that can be one of your sources of income. Other sources of income could include a pension or income you make from renting out a room or an apartment. Once you add all these together, you will get a figure for income you already have in place for retirement; now you need to find ways to bring in the rest.

3. Retirement calculator: A retirement calculator is a useful tool to help you calculate things like inflation and taxes and arrive at a more realistic figure. You need to take all these factors into account if you don’t want to fall short in your retirement fund. Based on the projections from the retirement calculator, you have a better idea about how much you need to put away each year into your retirement fund for it to last you till a ripe old age.

4. Invest: The best way to earn passive income after retirement is to invest. If you are still in your early thirties, then you have time on your side and can invest in stocks and bonds. You will need to do careful research to understand your best options or you could hire a broker to grow your portfolio. The best time to invest is when you are actively earning.

5. Clear all your debt: The last thing you need is to still be paying off your debts after retirement. The funds you put away for the future are much better spent on healthcare and travel. By paying off all your debt while you still have a job, you can ensure that your retirement fund is well spent the way it should be.

At first, when you do the calculations, the numbers might seem a bit intimidating, but when you look at it more carefully, they are not so bad. First off, if you are still in your thirties, you have approximately another thirty years to save up. When you break down the total amount you require by thirty and minus what you will receive from other sources of income, you will see that it is quite doable.

A few important points to remember are to pay off all your debt, save wherever you can, and account for inflation and taxes. Once you have all the key areas covered, you can make a good habit of putting money away for retirement and you won’t even feel the pinch.

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