When it comes to money matters, it can be hard to balance saving for the future and investing in the present. It can be stressful to think about what savings plan to opt into, or even how early it is wise to start saving. Do you wait until you are settled into a career-oriented position, and allow your pension plan to dictate your saving routine? Do you create your own tax-free savings account with your bank?
Many of today’s retirees have had to come out of retirement to go back into the workplace, because they didn’t save sufficient funds to tide them over in their later years. There seems to be a cloud of confusion when it comes to different savings plan options, with many professionals feeling like they have been left to fend for themselves and their future.
Because of this confusion, it can be good to invest in a tax professional, such as a financial advisor. Retirement can seem like a foreign period of time for most professionals, feeling intimidated with having to accurately predict this magic money number we will need to save to live a comfortable future. Living costs need to be considered, such as a health care costs, prescription fees, and the always rise of cost of living.
With all the miscellaneous consideration factors, it can be good to have someone on your side that has a handle on your finances and on what you are looking to save for. A financial investor can also help professionals with the confusing process of converting their savings plan, when the time comes, into a regulated income that will be lasting.
Set A Goal
Everyone is different; everyone’s lifestyle calls for different retirement savings. It’s a good idea to draft a plan of the ideal amount of money needed to sustain a lifestyle over an extended period of time. The average, ideal age to retire seems to be 60. If a person is in good health, they could live twenty years after retirement, and possibly even longer.
Ideally, professionals should aim to save between 70 to 90 percent of their pre-tax, pre-retirement annual salary. Once there’s a number in mind, it’s advisable to start figuring out how much money needs to be contributed (weekly/ by-weekly/monthly) in order to successfully build up to that goal. Outlining an appropriate budget can also help cut daily spending and contribute to saving.
Think about investing in a savings plan. Whatever the lifestyle, income, bills, or credit debt, there is a savings plan for every person. How do you know which one is a good fit? Set up an appointment at your bank. A bank representative can go over different savings plans, and outline the benefits and drawbacks to each one. Different savings plans can be applicable at different stages of life, and different plans offer different rewards.
Don’t Go It Alone
A spouse or partner can usually contribute and invest to the plan. Income earned from a savings plan is usually exempt from tax; you usually only have to pay tax when receiving payments from the plan, or when withdrawing funds from the account.
Some savings plans are geared primarily toward small and medium sized businesses that can’t afford other retirement plans. Others are geared toward providing pensions and benefits for members who retire, become disabled, or die. This can help professionals take care of their family or estate should they pass away, become disabled and need an income.
Outside of savings plans, it is equally as important as to when professionals begin investing. To ensure that enough money is there for retirement time, it is advised that workers start early- ideally in their twenties.
Even for those with seemingly low salaries, any regulated saving can make a big difference. Setting up an automatic direct deposit into a savings account can make all the difference. In addition to that, that portion of savings will be pre-taxed. Professionals also earn interest by putting their money into a savings plan, so even a small amount of savings can build and grow over 40+ years. It is also recommended that young people should go big when it comes to saving. To get the most out of savings, one route to go is putting the majority of their portfolio into stocks.
When it comes down to the wire, think about what assets you will have at the time that you can liquidate. Realistically speaking, by the time an individual (or a couple) is set to retire, they won’t need a large, empty house. Depending on the real estate market, individuals can turn a profit by selling their property and downsizing. This offers a sizable amount of money to contribute to retirement savings. It’s good to envision lifestyle a few years down the road: What would you have to sacrifice or get rid of to get by?
Don't Carry Debt Into Retirement
Debt can naturally accumulate over time. With far-reaching student loans, lines of credit, consumer debt, and everything in between, it’s common for individuals to carry debt as they go through life. But retirement is a whole new chapter, and it necessary to not only manage debt over time, but eliminate it entirely by the time of retirement.
Whether we choose to start saving their money early or later for retirement, it is always good to know different options. Saving for retirement can seem like a daunting and foggy subject, with so many unknown factors at play. Because of the seriousness of this issue, though, it is extremely important to start saving. Even the action of registering for a savings account or making an appointment with a financial advisor is a huge step, and one with a large payoff.
The key is to think practically about the amount of money needed to sustain a living and a life once retirement approaches. Drafting a retirement plan is the first step to having a comfortable retirement.