Retirement Planning: 5 Easy-ish Steps To Get Started

So, you're thinking about the future?

Well, retirement planning is your ticket to keeping the good times rolling even when you're old and grey.

Let's face it – slaving away until the end of time isn't exactly the American Dream (or anyone's dream for that matter), and banking solely on Social Security is like playing financial Russian roulette.

If you're under 45, its a mathematical guarantee you won't be able to cash in on it since it will be bankrupt in about a decade.

And any attempts to prolong it will end it disaster, so...focus on what you can control.

Retirement planning is a 5-step dance: figuring out when to start, crunching numbers to see how much dough you'll need, setting your financial goals straight, picking the right accounts, and choosing your investments wisely.

The general wisdom is to go bold with your investments when you're young and then take it down a notch as you get closer to ditching the 9-to-5 grind.

When's Quitting Time?

Deciding when to retire is a mix of when you want to and when you can afford to.

Dreaming of early retirement? Cool, but remember that dipping into Social Security at 62 means you'll get less cash.

Born in 1960 or later? The magic number for full benefits is 67, but holding off until you're 70 can bump up that check.

Some folks bail on work early, and others stick around longer.

Often, it's smarter to ease out of the workforce gradually instead of slamming on the brakes.

Retirement Planning in 5 Easy(ish) Steps

Let's break down this retirement planning gig so you can eventually kick back and do your thing, whatever that may be.

  1. Timing is Everything

    Start planning now. Seriously, the earlier, the better, because your money gets more time to grow.

    The best time to start investing was 10 years ago. The second best time is right now.

    Block out an afternoon on the weekend or forego a night of television and social media this week to really think about your future, what you want, and how you'll get it. Then start.

    Even a little saved now can make a big difference later!

  2. What's the Magic Number?

    How much you'll need to retire is a puzzle of current income, expenses, and how they'll shift down the line.

    You'll probably still want to live a little, so aim to stash away 70% to 90% of your pre-retirement income.

    That means if you're earning $63,000 annually now, you should aim for about $44,000 to $57,000 a year in retirement.

  3. Get Your Financial Priorities Straight

    Retirement savings is just one piece of the financial puzzle.

    You might have debts to squash or an emergency fund to build.

    If your job offers a retirement plan with matching contributions, jump on that – it's like free money.

    Where to begin depends are where you are. So be sure to calculate important numbers like
    • Net worth (total assets - total liabilities)
    • Monthly cash flow (monthly income - monthly expenses)
    • Income to investment ratio (monthly investment amount/monthly income)
    • Financial foundation status (having 6-12 months expenses saved)
    • Debt to income ratio (monthly debt payments/monthly income)
  4. Pick Your Retirement Savings Spot

    Deciding where to save your retirement fund is crucial. 

    Got a 401(k) with matching contributions? Start there.

    No 401(k)? Look into opening an IRA.

    There's no one-size-fits-all plan, but generally, you want something with tax perks and, if possible, matching contributions.

    The best plans provide tax advantages, and, if available, an additional savings incentive, such as matching contributions. That's why, in many cases, a 401(k) with an employer match is the best place to start for most people. I mean, that's 100% ROI on a matched 401(k). It's pretty dang impossible to beat consistently.
  5. Investment Choices Matter

    Your retirement fund can be a mix of stocks, bonds, and mutual funds, depending on your age and how much risk you can stomach.

    Young and fearless? Lean into stocks.

    Nearing retirement? Choose more less volatile investments.

    Your investment strategy should evolve with your life stages, but retirement account don't need your constant attention.

    Just put some time on your calendar every 6 to 12 months to check on the fund allocation and make sure that its doing well. Then, make adjustments if necessary.

     

     

    A few solid mutual funds or a financial advisor can keep you on track if you don't mind giving up some gains for peace of mind.

So, there you have it – retirement planning made simple to hopefully get you motivated to begin now!

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