Although virtually everyone is aware of how important it is to save money towards your retirement years, very few individuals know where to start, how much they will need to save each month and how to ensure that what they are saving will be enough to let them enjoy their golden years without worrying about finances any more than what’s totally necessary.
Pensions – No Longer as Popular as Before
In years gone by, many individuals relied almost entirely on pension schemes to see them through after retiring. If you were fortunate enough to land a decent job, remained in the same position for 20 to 30 years and then retired from that company, you would have been able to enjoy receiving monthly pension payments that were usually sufficient to cover virtually all of your living expenses.
Good pension plans allowed employees to invest small sums of money into Certificates of Deposit (CDs) and bonds so that they could even enjoy a few extra luxuries as well.
Sadly, most companies no longer offer pension scheme benefits to their employees anymore. This means that retirees must now rely on alternative income sources – and not just Social Security benefits either anymore.
Start Saving as Early as Possible
The sooner you implement a savings plan for retirement, the better. Financial experts usually recommend that you should start investing in a diversified portfolio at least 15 years before your planned retirement date. However, if you’re able to do this earlier, you’ll be able to take advantage of compounding interest over a longer period of time.
Develop a Workable Plan
It’s essential to have a plan set up that details the amount of money which will be withdrawn from your nest egg each month – also keep in mind that there may be some months where expenses will be higher than others, like at Christmas time. As such, you’ll need to determine your monthly living expense requirements and plan on withdrawing 4% or less of your retirement savings annually.
Diversification is Crucial
Although stocks and other investments can increase substantially in value, they can also take a sudden dive when least expected. As such, it’s essential that your retirement portfolio be diversified so that it includes annuities, bonds, CDs and stocks.
Social Security as a Supplement to your Income
While Social Security payments will currently provide a steady form of monthly income, it’s recommended that you only start claiming these funds well after the age of 65 – otherwise you could lose as much as 20% of what your payments could actually be.
At present, the minimum age for retirement is 62. However, most individuals won’t qualify for their full Social Security amount until reaching between 66 and 70 years of age. If you’re not keen to wait this long before retiring, you may either have to continue working until this time or ensure that you can receive income from alternative sources until reaching the right age to claim from Social Security.
If you would like to ensure that your retirement is as financially stress free as possible, get in touch with our team today. We’ll be happy to assist you with setting up a realistic savings and investment plan.Continue reading