Saving for retirement requires careful planning, as well as periodic check-ins to figure out if you’re where you need to be. You don’t have to check your portfolio every day, but you should take stock from time to time to see where you stand and figure out if you have to make adjustments to meet your goals.
Be Clear About the Type of Retirement You Want and Expect to Have
The first step is to figure out approximately how much money you’ll need when you retire. There’s no one-size-fits-all number. The state where you plan to live, taxes, the cost of living in that area, and whether you’ll have to make monthly mortgage payments will be critical factors. If you intend to travel a lot when you’re no longer working, you’ll need to save a substantial amount to be able to do that and meet your other obligations.
Life might not be carefree after you retire. If you have chronic health problems, you might have to budget a large sum for medical care. Even if you’re in reasonably good health now, you might need an in-home aide, assisted living, or a nursing home at some point in the future. Be realistic so you can plan accordingly.
Think About When You’ll Retire
If you want to retire early, you’ll have to save aggressively to make that happen. If you plan to keep working until you’re 67 or older, you’ll have more time to save. Retiring later can allow your investments to grow substantially due to compound interest. You’ll also get higher Social Security payments each month if you wait longer to begin collecting benefits.
You might not want to retire completely, at least not right away. Many people get bored, anxious, or depressed if they don’t have something to keep them busy and give them a sense of purpose. If you want to work part-time after you retire from your full-time job, you won’t need to save as much as you would if you stopped working altogether.
See Where You Stand
Use an online retirement calculator to project how much you’ll have when you retire. You can enter your projected retirement date, the amount you think you’ll need per month, your portfolio’s current balance and how much you contribute each month. A retirement calculator makes assumptions and can’t predict the future, but it can be a helpful tool.
Consider Making Changes
If you’re not on pace to save enough for retirement, the sooner you realize that, the better. Increasing your contributions and/or adjusting your asset mix can help you get on track. A financial planner can discuss your goals and help you figure out the best way to save for the retirement you want.
