By: Harriet, co-founder, CocoFinder
When planning for retirement, the key steps to take include:
Assess Your Retirement Goals
It is good to think about how you want your retirement to look like. Ask yourself questions about your ideal retirement life if you wish to travel the world or live in a secluded community. Note down everything you want to help you in planning further.
Your answers to these questions will help you determine the amount of money you need to save. You can then devise a plan to achieve this goal. It is good to think of ways to increase your revenue and savings while reducing your expenditure.
Check Your Financial Status
Here, you have to be as realistic as possible to see if you can achieve what you want. How much do you earn? How much debt do you have? Are you managing your debt? How do you spend your money? Also, check whether you are saving or investing enough. A professional in finance can help you address these questions.
The best thing here is to understand what you want in your retirement versus what you can afford. Assessing your financial status will help you understand where to start and how to handle the process. It may all depend on your level in your career. The finance professional will be good to give you tips and ideas on what you can manage without straining.
Measure Your Retirement Needs Against Your Income Sources
After ascertaining what you want in your retirement, it is time to check if your income sources and assets can facilitate it. Here, you have to make decisions that will help you save and invest enough to finance your retirement. The first step to take is cutting significantly on your expenditure.
Theoretically, reducing your expenditure can help you have more money to save. However, it requires discipline and planning. You can assess your investment portfolios, pension pots, and home equity. Have a rough idea of how these will look like when you retire. In many cases, people choose to downsize and move to a smaller home to help get more money to enjoy their retirement.
Understand That You Can Have Unexpected Expenditure
Planning for retirement can fool us into thinking that we have control of everything. We can think of the things that are guaranteed and envision the happiness of enjoying retirement. However, it is good to think of something that you may not expect.
You can always have a contingency fund that will handle unforeseen issues like health problems. You do not want to spend your retirement fund on such occurrences. The money you put aside for these happenings will come in handy.
Starting early gives you enough time to capitalize on the power of compounding. If you choose to delay, you may run out of time and end up compromising on your goal. You do not want to depend on your children or family for all your financial needs. The good thing with starting early is that you can do it comfortably.
Remember to decide your retirement age for proper planning. Many people retire at 60, but you can choose to do it at 55. It all depends on how well you plan and execute your goal. Be sure to make enough savings and investments.
Conduct Regular Reviews
The best thing you can do is to monitor your retirement plan regularly. You can choose to do it yearly or twice a year. It helps you understand whether or not you are on track to achieve your retirement goals. Whenever you encounter or make any changes, be sure to incorporate them into the overall plan.
For instance, changes in your income and expenses may affect your plan. To ensure that your plan meets your objectives in the current times, you can always calculate the future value of your savings and investments. You can start by establishing how much you can save in a year.
By calculating the return on investment, you can ascertain whether your savings will help achieve your goals. Here, the rate of interest you earn on your savings and investment is vital. You also have to review any changes in interest rates and your saving patterns.