The following is a guest post from my colleague, Spencer. Spencer writes at the Military Money Manual on achieving financial independence while serving in the...
Nine Steps to Begin Retirement Planning
The ebb and flow of the U.S. economy has made retirement saving without a plan difficult. If you do not have an Individual Retirement Account, Thrift Savings Plan or any other type of retirement saving vehicle, then it's time to start planning for your future. Here are nine retirement planning tips from Money Magazine:
- Begin saving as early as you can, but don't give up if you get a late start: You can pad your retirement if you begin saving as soon as possible. For example, if you begin saving $100 a month at age 30 you'll have $216,000 in the bank when you're 65 (that's assuming there is an 8 percent annual return). If start saving at age 40, you'll have close to $91,000.
- Create a retirement plan - Americans who have done a retirement calculation have nearly five times the savings of those who haven't, according to the American Savings Education Council.
- Get the most of your 401(k) - If you have a job in the private sector that provides a 401(k), make sure that you use it. Taking full advantage of the tax benefits and employer plan is key to building a successful retirement. Additionally, don't make the same mistake 20 percent of Americans do by not contributing to this plan.
- Take advantage of other savings plans - Think in terms of multiple retirement savings plans such as IRAs, TSPs, Roth IRAs, Simple IRAs, SEP-IRAs and Keoghs. The more you save now the bigger your nest egg will be.
- Take a retirement job - Working during retirement might feel like a paradox but here are two good reasons to work: finances and emotional benefits. Income from a part-time job can make your retirement nest egg last longer. And, working offers emotional benefits from interacting with people.
- Don't be afraid to improvise - With unexpected expenses popping up and depleting your savings, it might seem impossible to actually save money. But there are ways to improve your financial situation. Those options include: delaying retirement, taking out a reverse mortgage, or relocating to an area with lower living expenses. Be resourceful and think adventurously.
- Monitor your progress regularly - Once you formulate a retirement strategy, try to review the plan at least once a year and make adjustment as necessary.
- Plan an exit strategy - Set a reasonable withdrawal rate from your retirement account. Figure out whether to pull money from tax-advantage or taxable accounts first. You goal: manage your assets so you don't run out of money before you run out of time.
- Instill passion into your retirement planning - Think about how you would like to spend your retirement years and what activities are likely to challenge and excite you. And when you finally do retire, pay attention to your finances but don't obsess over them.
Most of these rules fall under the common sense category, but if you remember to adhere to these simple savings strategies, retirement will be the best time of your life. For more information about retirement or savings, visit the Military.com Retirement section.
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