Retirement Planning

Learn more about preparing and planning for retirement, from investment account and assets to saving tips to meet your retirement goals.

Retirement Planning

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What is a Retirement Plan?

Several types of retirement plans are available, including 401Ks, IRAs, pension plans, and other plans such as annuities. Depending on your goal for retirement, you want to make a plan that takes you there.

How to Start Planning for Retirement

Planning for retirement may seem like a task you want to postpone. However, the earlier you start planning and investing in your retirement, the earlier you may be able to retire. You will also have to think about the lifestyle you want to have when you retire to make sure the monthly income from your investments and any pensions can support it.

1. Decide When You Can Retire

The standard retirement age is typically between 60 and 70. However, that does not mean you can’t retire earlier if you stick to your retirement plan. Also, consider that some retirement accounts will not allow you to access your funds until a certain age.

2. Understand Your Retirement Spending Needs

Retirement spending needs vary from person to person. Some people want to live more lavishly than they did when they used to work, and others just want to maintain their lifestyle. 

Both goals are possible, but increasing your spending needs in retirement is the more difficult choice. You can evaluate the amount of money you want to make yearly and calculate how much you’ll need to meet that annual income in interest.

3. Calculate How Much You Need to Retire

Most financial consultants recommend earning about 75% of what you earned while you were working. This amount of money will replace your pre-retirement income, so you want to make sure it matches your spending needs when you decide to stop working full time.

Several retirement calculators are available that allow you to put in your retirement age, an average interest rate on the money, and then tell you how much of a nest egg you’ll need.

For a quick calculation, you can use the 4% rule. A nearly guaranteed amount of interest you can make on your money is 4% yearly. This means that if you take your post-retirement desired income and multiply it by 20, that is the amount you’ll need to be squirreled away for retirement.

4. Determine the Best Retirement Plan for You

A retirement plan includes the retirement accounts mentioned above (401Ks, IRAs, and others). The overall goal for your retirement should consist of a combination of these accounts in addition to cash, social security benefits, health savings accounts, and more. 

Everyone’s situation, job, and how much they can contribute differ, so if your job offers you retirement plans, you should look into those. If a retirement plan is left to your own devices, you have other options available.

Taking in all of your available options is the first step, and then making a plan is the next. This plan should be based on interest rates, reduction in overall income, non-taxable accounts, and more.

5. Choose Your Retirement Investments

Each retirement plan can be invested in stocks, index funds, ETFs, and more. Choosing a suitable retirement investment will depend on where you are at in your working life and how risky you want to be.

For example, index funds and mutual funds tend to be less risky than stocks. Also, the older you are, the less risky you’ll want to be since you don’t have as much time to recover any potential losses between now and retirement age.

Retirement Saving, Investing and Planning Solutions

Learn more about companies that can help with you saving, preparing or planning for retirement.

iTrustCapital Logo
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Personal Capital
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Things to Consider When Planning for Retirement

Most people think of social security and if it will be around, but there are many other factors that most working Americans don’t consider when planning for retirement.

Types of investments, how much income they make, tax write-offs, where they want to live when they retire, and more should be considered in a retirement plan.

Stick to Your Retirement Savings Plan

If you’ve gotten to this stage, you should have a goal in mind for how much money you need to put away each month to meet your retirement goals. Treat these savings goals as a bill. 

Sticking to the savings plan you set up will ensure you meet your retirement goals.

Learn About Social Security Benefits

Social Security is different based on when you were born and when you retire. You can technically take social security early and receive fewer benefits. Additionally, some people can retire late and receive increased social security benefits.

Learning about all your options will be necessary for completing your retirement plan.

Understand Basic Investment Principles

When looking at what to invest in, it can be overwhelming. Even professionals have to spend days evaluating all of the options to make the right choice for their clients.

The basics you’ll want to keep in mind are that you can take more risks if you are younger. If you are older, you will want to have more steady and secure investments. Keeping this in mind is a great first start to investing.

Contribute to Employer’s Pension or Retirement Plans

Employer retirement funds typically have tax implications, and your employer may also match your contributions. This contribution can mean that your employer will also invest a dollar into your retirement if you invest a dollar.

Utilizing retirement plans provided by your employer is always a fantastic place to start!

Pay Off Debt

Paying off debt is typically the first step that financial planners recommend. The reason for this is that the more debt you have, the more interest you’re paying on that debt. 

The interest paid toward debt does not go into your pocket or make you more money, so paying down your debt quickly is one of the best ways to save yourself money in the long term.

How to Save for Retirement

As we mentioned before, there are so many ways to save for retirement. It can be daunting looking at all of them, but very little changes once you have decided how to save for retirement.

1. High-Yield Savings Accounts

High-Yield Savings Accounts are looked at as a very safe and secure way to grow your money. These accounts range from .5% interest to 2% interest, depending on where you invest. These won’t grow quickly, but they are as risk-free as you can get aside from hiding money in your mattress. One of the downsides of saving for retirement using this option is that you won’t be able to access the tax advantages IRA accounts offer.

2. Individual Retirement Plans

Most people only know the acronym for these accounts. An IRA has a multitude of options and is by far one of the most flexible retirement accounts.

  • Traditional IRA

A traditional IRA is a retirement plan that allows you to contribute money to an account invested in the stock market the way you want it to be. The money put into this type of IRA is typically tax-deductible, but you’ll be taxed on the interest made in this account once you start withdrawing at 59½.

  • Roth IRA

A RothIRA differs slightly from a traditional IRA. The contributions to a ROTH IRA are not tax-deductible, but you do not have to pay taxes on the interest made in this account when you withdrawal from it. A ROTH IRA can also be invested into a variety of stocks, ETFs, and Mutual funds.

  • Simple IRA

This type of IRA is an employer-based IRA. It helps small businesses provide a retirement plan for their employees. It allows for a more significant contribution, but the money withdrawn will be taxed once you retire.

3. Employer-Sponsored Retirement Plans

SEP accounts and 401Ks have become the focus of employer-sponsored plans over the years because of their consistency, and the amount employees and employers can contribute. They benefit both the employee and the employer much more when compared to a SIMPLE IRA.

  • Traditional 401(k)

A traditional 401K allows your employer to contribute to your retirement with pre-tax dollars. In addition to their contribution, you can pull out a portion of your paycheck to contribute pre-tax dollars as well. This means your income would reduce based on how much you contribute to the 401K.

  • Roth 401(k)

A Roth 401K is post-tax dollars, but the withdrawals you make during retirement will not be taxed. The main difference to consider here is if you will save more money being taxed now with a Roth 401K or if you’ll save more money being taxed later as with a traditional 401K.

4. Self-Employed Retirement Plans

A SEP IRA is a retirement account that allows self-employed employers to open a retirement account for themselves and their employees.

These types of plans allow for tax-deductible contributions to be made to an account that has a higher maximum contribution than other retirement accounts, such as IRAs.

Investment Options for Retirement

Once you’ve chosen your retirement plan, there are ways to invest in that retirement plan as well as other additional options outside your retirement plan. Stocks, bonds, crypto, and precious metals are all great ways to invest if you’ve met your maximum contributions on the other retirement accounts above.

1. Stocks

Stocks were and are all the rage. Stocks allow you to purchase a piece of a company and grow your money as the company grows. You can purchase any company that is publicly traded and attempt to earn interest on your investments. These can be extremely risky, but there are ways to invest safely within the stock market.

Blue-chip stocks and large-cap stocks tend to be safer investments. Additionally, dividend stocks are seen as a safer option when braving the stock market. The smaller the company is, the more risk you are taking when investing. 

2. Bonds

Bonds are issued by corporations or the government to gain money immediately in exchange for paying interest later. You can think of bonds as a way for you to provide a loan to businesses or governments.

Bonds are extremely safe but tend to have a lower return rate over time than any of the other options listed here.

3. Cryptocurrency

If you want to diversify your retirement investment portfolio, you can invest in several different cryptocurrencies. Most people stick to Bitcoin or Ethereum, but there are 100’s of altcoins on the market to invest in as well.

Cryptocurrency is still seen as a risky investment that is very volatile, but if you have a little bit of extra cash, as little as $10 can be invested in the potential growth of a cryptocurrency.

You will have to open a retirement investment account through a specialized company that offers Cryptocurrency IRAs.

4. Precious Metals

One of the oldest ways to invest is with precious metals. Most people only think of gold when the topic is brought up, but you can technically buy any precious metal and see if it appreciates over time.

Precious metals are riskier than bonds but much less risky when compared to stocks or cryptocurrency. Gold, Silver, and Palladium are some of the most purchased metals and aren’t going anywhere soon.

How to Get Started Planning for Retirement

If you are interested in making a retirement plan, one of the best ways to start is by gathering information about the available investments, deciding on the type of plan and asset you want to invest in, then speaking to a specialized professional about how to get started with it.

Get Started with Retirement Planning

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