With the busyness of daily life, it is difficult to devote time to this type of issues, thinking when starting to plan your retirement does not seem so important, especially if you are still in your 20’s.
However, we can tell you with certainty that it is never too early to start planning your retirement, especially when this is not something you know when it will happen.
Well, yes, your retirement does not necessarily come with old age; you can decide to stop working before if your income and financial planning allow it, or in the worst case you may have to stop working for causes that are at your will.
Being the case, we decided to bring you this blog in which we explain what your options are to plan your retirement in a timely manner and without affecting your current lifestyle! Keep reading.
When to Start Saving for Your Retirement?
According to some experts, the ideal time to start preparing for retirement is when you receive the first formal salary, which happens around 25 years or earlier, so you will have a period of approximately 40 years to make a substantial saving that allow a worthy retirement
Average Retirement Savings by Age
According to an EPI analysis that came out in 2013, the average retirement savings in the US was about:
- $31,644 for people between ages 32-37
- $67,270 for people between ages 38-43
- $81,347 for people between ages 44-49
- $124,831 for people between ages 50-55
- $163,577 for people between ages 56-61
Note that the amounts above are inclusive of the people’s assets and full balance.
What Options Do I Have for Retirement Planning Strategies?
There are different options to plan your retirement, but mostly these consist of creating long-term passive income or generate savings, that is, strictly, your options are based on having enough money to not have to work more or have sources of income that do not require your presence to continue generating profits; the second being the most efficient option.
Methods If You Go for Savings:
All these options have something in common, low to 0 risks; and, that is the point about savings, you shouldn’t feel that your money is at risk and that it is as safe as possible, protected under a strong agreement and being carried by a prestigious institution.
You can try the traditional savings– that is, choose to save money in a bank account –Not under your couch- in a saving account, generating profits through interest, and add by this means over the years.
You can save on goods or long-term investments– You always have the possibility of acquiring assets or investments with low volatility, this allows you to manage an extra in your savings if the long-term investment grows.
Public pension savings– Depending on your state, country and some other factors, social security will generate a pension at the time of your retirement (usually with strict clauses on when and for how long this benefit will take place).
Savings in private pensions– Some financial institutions, as well as institutions dedicated to this, offer you the option of generating a payment during your working life and planning through a portfolio of investments your future life.
This option is particularly useful if you live on a salary, since not only will it allow you to save more efficiently, but when the time comes to collect, you will be given full or partial withdrawal options and information on how to manage the money.
Fixed long-term terms– An uncommon option and for which you need to have something already saved is to establish a long-term fixed term contract with a bank (This is also an excellent tool to save for the education of children who still have you do not have).
Investment Retirement Strategies:
Now, not all retirement options have something to do with savings, in fact, the best recommendation if you look at finance specialists is to invest the money for the next three facts:
- Even in the strongest currency, money devaluates in time
- Even in the safest place, money won’t grow as fast in a savings account as to be successfully more when you get it out at your retirement age.
- Your expectations about what to do when you retire may change, and you could need more money to cover the new plans.
In addition, you can get in front of an unexpected problem that drinks part of your savings, which isn’t accountable from the beginning but can be pivoted if you invested and got some extra cash.
Warning– Unlike with savings, all the options placed below pose a risk, therefore you should know that there is a chance of you losing money instead of earning it.
Entering an investments fund– This one is a risky choice; an investment fund usually has low guarantees and you need to know that the earnings are not as great as they sell them most of the time.
About this, it is advisable that you look for a trading company that offers both security and a good investing history. To put it through, just like a bank would do with your money, investment funds trade with it to reach more earnings, but unlike the bank, they give you the profit and keep a fixed rate.
Retirement investment on the real estate market– The ghost of the scam movies of 2008 –And sure, the real state bubble that broke the economy apart in the US and half Europe- has lowered the speed of one of the most reliable markets, but it is still a great option to invest your future.
You can do two things here, either buy houses as saving assets and hope that their value growth within time –This can be strategically done as well- or even just buy immovable to rent and live from it, which works well as an early retirement plan
Buying Bonds– Bonds are basically Loans that you make to official entities such as the government, corporations or other publicly running companies. These give you back a regular interest rate after using the money and are a safe and amazing way to proceed –As long as you are able to cash out the loans.
There is a third option, depending on your health and willingness to keep working on your own you can remain active by engaging in less wasting activities than your current work after retirement.
The “Stay Active” Options
A profitable hobby – If you are into writing, handcrafting or even small car repairs –The options here are limitless- You can get involved more with that hobby once you retire and keep making a living from it; in some cases, people even make much more money than they did before retiring.
Administrate your investments by yourself – If you are good managing money, you can opt for this option which will save you some deal of money in fees from the administrative entities that otherwise would manage your capital.
Here, on the other hand, you will get less freedom and will be practically back to work –For example, if you landlord your assets by yourself, you have to keep track of payments, damages, clear times, accountability and restoration, all over again every time-.
In the End
Financial planning for retirement is not as hard as it sounds, there are a lot of retirement investment companies that will grant you access to a nice savings account. They can also work based on your suggestions, meaning that you will have access to your money as you need it and can be generating income in really long-term shots.
Use A Retirement Simulator
The best way of preparing for retirement is to keep track of your expenses and income and start activating any plan as soon as possible.
Keep in mind that life is unpredictable, anything can happen along the way and you need to be prepared, evaluate the risk of every investment option –If you go for real estate, pick a non-earthquake zone to buy; if you go for bonds, pick reliable companies, and so on-
By using a retirement simulator, you can know exactly how an investment account will work for you based on your current and future savings retirement capital, the age at which you start saving and the type of account that you choose; this makes financial tools much easier to choose.
To Sum Up
Keep track of your expenses, but don’t stop living your young life. The best way to go, although it means some extra work and dedication right now is to have a varied portfolio of future solid incomes, you can try just picking one of each list and have all three, savings, investments and good activity.
Make all your years be golden! Add this to your new year’s resolutions and get a great retirement plan started now!