Retirement is something most people start dreaming about early on in their professional lives. Now whether that dreaming is tied to active or passive planning is a different matter entirely. Putting money into IRA accounts to get tax deductions and allocating part of a paycheck to a company 401(k) is all well and good, but truly saving and planning for retirement takes proactive attention to detail. As your career continues to progress, retirement should be something larger on your radar, a future event that deserves significant time and focus.
Whether you’ve let your retirement ideals grow smaller in the rearview mirror or you’re struggling to find the right motivation to increase your savings, it’s time to get back on track. These five tips can help you jump-start your retirement planning efforts, even if you’ve fallen off the proverbial savings wagon.
Imagine Your Ideal Retirement
What do you want to do in retirement? Would you like to travel? Move to somewhere exotic? Leave a legacy in place for your children and grandchildren? Even if you plan to downsize your home and live a quiet life with your spouse, every stop in retirement requires careful planning.
Achieving your dream retirement may take extra effort, but having an idea early can be the ticket to success later on. With a concrete goal in mind, it’s much easier to plan for how much you need to save, saving yourself the stress of being surprised – or disappointed – later on.
A big part of planning for retirement means understanding what you have at your disposal. Your assets can include many things, from your car to real estate to your employer-sponsored retirement savings accounts.
One asset in particular to consider is your primary residence (as long as you’ve lived in it for over two years). According to Bankrate.com, you can make up to $250,000 in profit – twice that if you’re married – without owing any capital gains taxes if you choose to sell your home. You don’t have to buy another home with the sales proceeds; you can use it for whatever you want.
Thus, even if you don’t plan on downsizing, knowing that you have the option of selling your home without a big tax bill can offer some comfort in the long term. It can provide a chunk of cash if things get tight – cash that you can then convert into guaranteed income or use to cover unexpected retirement expenses. Just be sure to invest all assets, including proceeds from a home sale, wisely; protecting your retirement nest egg is key, especially the closer you get to retirement.
You’re contributing to your IRA, taking a more conservative approach to your investment accounts, and putting money into your employer-matched 401(k) – that’s enough, right? Well, maybe, but probably not.
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In the years nearing retirement, you should be maxing out all contributions and aggressively saving money, even if you think you’re in a good place. If you’re 50 or over, don’t forget to take advantage of catch up contributions to your 401(k) and 403(b), as well as SIMPLE and Roth IRAs.
Explore Retirement Income Sources
Planning for retirement can be done in many ways, but a big step many people don’t take is considering additional sources of income in retirement. While no one anticipates running out of savings, it can happen, and when it does, you’ll want an insurance policy.
There are many investment options that, when purchased early, can pay out nicely in retirement. Options like bonds and annuities can offer additional income when your retirement savings begin running dry, giving you the means you need when money gets tight. Not sure you need it? Taking advantage of a free income analysis can help you understand where you stand now.
Coordinate With a Professional
Retirement planning, like most important decisions in life, is best done with assistance from a professional. Even if you’re nearing 50 and plan on working for 10 to 15 more years, planning ahead is best done earlier rather than later.
A retirement planning expert can be exactly what you need to help you understand your situation completely. He or she can give you the tools you need to tie your strategy together and help you feel more confident in your plans. A professional can show you the bigger picture, giving you the best possible assistance in planning for your future.
Planning for retirement doesn’t have to be an overwhelming process, but getting sidetracked can be very discouraging. Rather than giving up on the retirement you desire to live, jump-starting your planning efforts now can be what it takes to build a foundation for a brighter tomorrow.