Planning for your retirement is an important thing to do. It can be hard to know where to start, but there are certain things you need to know for proper retirement planning.
Know your Retirement Needs
Before you can actually begin planning for your retirement, you need to understand your retirement needs. You need to be able to estimate your future financial expenses, identify sources of retirement income, and evaluate your social security benefits. All three of these things can give you a clear picture of what your retirement needs will truly look like.
Estimating your future expenses will help you to ensure that you have enough money to live comfortably during retirement. You need to consider inflation, healthcare, and other living expenses. With this information, you can plan how much you need to save for retirement.
Along those lines, it’s important to identify your sources of income during retirement. This can include social security benefits. Any income you can plan for during retirement will contribute to your total needs. If you have income coming in, you will need less in your actual savings.
Consider your Retirement Savings Options
Once you have estimated how much money you need to live during retirement based on savings and income, you need to consider how you actually plan to save. There are options from a workplace retirement plan, an Individual Retirement account, and investments that can allow you to reach your retirement goal.
A work-sponsored retirement plan will allow you to directly invest your paycheck into a retirement account. A certain percentage can be invested, and your employer may offer a match on a certain amount. This is essentially free money for your retirement.
Along with an employer-sponsored program is an individual retirement account (IRA). An IRA is another retirement account you can open and contribute into.
Finally, you can add additional funds through a brokerage count. This isn’t a true retirement account, but it can be used for your retirement.
Try to utilize all of the resources and ways that you can save for your retirement. Combining all of these options can allow you to diversify your portfolio as well as save more overall for a long-term investment goal. Continue to monitor your accounts to make adjustments to reach your needs if you need to.
Plan for future healthcare costs
During retirement, healthcare costs tend to increase. This is part of the aging process, and it is best to plan for these rising costs while you are healthy and younger. Make sure you understand Medicare, insurance, long-term care expenses, and HSAs as a part of your retirement planning.
When you are of retirement age, you will be eligible for Medicare. Medicare is health insurance for anyone over 65 years old and will cover certain medical expenses. Medicare may not cover all expenses, so it’s important to plan for additional insurance to cover your medical needs.
Planning for future healthcare costs includes planning for any long-term care you may need in the future. This can be a very expensive cost for your family to cover, so planning for it can help you cover this cover.
Lastly, consider how you can use a Health Savings Account (HSA) for health care costs. If you have high-deductible insurance during your work, you can contribute to an HSA. An HSA is a health savings account that allows you to put in pre-tax income for future medical expenses. You will not have to pay taxes on the withdrawals.
Create an estate plan
One last important area to consider for retirement is creating an estate plan. Estate planning ensures that your assets and property are properly managed and distributed after you pass away. It can help your family avoid any unwanted stress and helps protect your loved ones. Writing a will, assigning a power of attorney, and creating a trust are all ways that you can control your assets.
Writing a will is important to ensure your assets go to the people you want them to go to. A will outlines how you want your assets distributed after your passing. If you do not create a will, a judge will determine how your assets are distributed. These may not be the wishes you had.
Assigning a power of attorney is another important part of the estate planning process. A power of attorney is someone you assign to make decisions on your behalf. Choose someone you trust that will make a decision in your best interests. If you don’t assign someone, a different person could be appointed for you who doesn’t have your best interest in mind.
Lastly, create a trust to allow you to transfer your assets to another person. Creating a trust for your loved ones can provide them with tax benefits, protect assets from creditors, and ensures your assets are distributed according to your desires. Without creating trust, your loved ones won’t get their protection.
-Sara DeSantis
Community Resource Federal Credit Union