Financial planning is crucial throughout all stages of life, but many people think retirement planning can be left until later. In reality, however, it is never too early to start planning your retirement. Most people spend the bulk of their waking hours either working, getting to and from work, or thinking about work. Which is why the idea of retirement can be both inspiring and daunting. While saving and planning for the future is rarely easy, following these steps will give you the best chance of achieving your retirement goals.
1. Start planning early
The earlier you start setting goals and implementing strategies to achieve them, the better equipped you will be to deal with the curveballs life will inevitably throw at you.
2. Outline your goals
You need to figure out exactly what you want to achieve with regard to retirement, then prioritize those goals. It is impossible to accomplish anything if you aren’t clear about what it is you are aiming for.
3. Choose a realistic retirement date
Even if the exact date may change over time, setting a goal and working toward it helps you focus your energy and remain consistent.
4. Determine your lifestyle needs in retirement
Accurately projecting your short-term cash flow and long-term capital needs in retirement can be simultaneously the most difficult and most important element of a successful retirement plan.
5. Calculate your sources of income
Before working out an investment plan you need to work out how much income you can expect to receive annually in retirement from all sources, such as company pensions, government pensions, or annuities.
6. Establish how much you will need to save
Once you know how much income you will have before dipping into your savings, and how much more you will need to meet your lifestyle needs, use a set of reasonable assumptions for rate of return, inflation, and life expectancy to determine how much you need to accumulate in savings to make up the difference.
7. Invest wisely
Developing an investment strategy specifically tailored to your new financial scenario is essential to account for the numerous different issues you now face. Generating productive returns within a tax-efficient structure while adhering to your current risk tolerance, all while managing to provide sustainable annual withdrawals is no easy task and should not be undertaken lightly.
8. Adjust your plan through different stages of life
Whether it be investing, tax planning, or lifestyle needs, your situation is constantly changing. Your financial plan needs to change along with it.
9. Stay disciplined
Implementing your plan and staying true to it, regardless of outside influences, gives you the best chance of reaching your long-term goals.