No matter your age, you’ve probably dreamed of the day you wake up in retirement able to do whatever you want. However, if you’re like many people, you may not have given much thought to how you will achieve those goals. Proper retirement planning is essential if you hope to have enough money saved up to cover your expenses throughout your retirement.
If you fail to plan for your retirement, you could be left with nothing for yourself or your heirs after just a few short years. This is why it’s so important to start retirement planning well in advance. Here are eight factors you’ll need to consider.
1. Estate Planning
It’s only natural that when you consider the end of your career, you might also worry about what will happen to your assets after you die. Estate planning today can save your loved ones time, money, and emotional distress later.
Deciding which type of documents are right for your situtaion can be confusing? Do you need a will or a trust? Is a power of attorney necessary? A trusted attorney can help guide you through all of your questions. At Ogborne Law, we will work with you to assess, plan, review, and implement everything you need to ensure your estate plan is comprehensive.
2. Target Retirement Age
Before you start planning your dream retirement, you’ll need to figure out when you intend to stop working. Your financial needs if you retire at 50 will be very different than at 65. The earlier you hope to retire, the more money you’ll need. Your target date will have a major impact on your retirement planning process.
3. Risk Tolerance
You’ll also need to determine the level of risk with which you’re comfortable. Typically, stock investments are more volatile than bonds. However, less risky investments typically bring smaller rewards. Talk to a financial advisor to learn more about how to strike a balance between the two. As you get closer to your retirement date, you may want to shift your investments to more stable options to avoid losing your life savings.
As part of the retirement planning process, you should also make a plan for tackling your debts. From credit cards to a mortgage, debt can loom over you when you’re on a fixed income. It can also be a burden on your loved ones if the debt continues after you pass on.
5. Tax Savings
Choosing which type of retirement account to invest in can have a big impact later. For example, a 401(k) uses pre-tax money to build the account. That means your taxable income for the year you contribute is reduced. This can help free up money to save while you’re young. However, when you withdraw from the account, you will be taxed at your current income tax rate. Depending on your situation, this could be beneficial.
On the other hand, a Roth IRA uses after-tax money and withdrawals are generally tax-free. Consult your financial advisor or tax accountant to determine which type of account is right for you.
6. Now vs. Later
Retirement planning is a trade-off between what you want now and what you’ll need in the future. You may have to say no to vacations and other major expenses today in order to secure your finances for retirement. Take the time to think about what you truly want and prioritize.
7. College Planning
If you have children, your financial plan may include helping pay for their college tuition. While this is admirable, retirement savings should be your first priority. Your children can take out student loans to pay for college, but you can’t borrow money to fund your retirement.
8. Social Security Benefits
The amount you receive from Social Security depends on your income when you were working. You’ll be able to collect more each month if you delay taking distributions. Finding out how much you can expect is an essential aspect of retirement planning, as it will inform how much additional savings you’ll need to live comfortably.
Whether you have a modest home or a millionaire mansion, you’ve worked hard to get there. You never know when the unexpected will occur, so make time today to plan for your future. To learn more about estate planning, contact Ogborne Law.
Engaging with an attorney to protect your family is never an easy step. Whether you need to protect your family from the unthinkable or restructure your family through collaborative divorce, we’re here to help. When you’re ready to schedule a consultation with Michelle Ogborne, please visit the scheduling page to get started.