Today we’re going to discuss how to plan for your retirement. We all know that saving is essential. It is super vital for any person to budget and to save for a rainy day emergency fund, but it is also necessary to save for retirement, however far off. A safe, secure, and adequate retirement fund doesn’t just happen by magic, however. It takes planning and preparation. These five steps will help you plan your retirement fund and be ready for that day when it gets here.
Know Your Timeline
Retirement planning starts by figuring out when you want to retire and how long that is from the age you are now. If you have many decades before retirement, you have longer to save up, and you also have a larger cushion for potentially riskier investments. Your investment portfolio can withstand a little more risk if you’re investing longterm (usually more than ten years) than if you have only a few years left till retirement.
Figure Out How Much You Need
To establish your retirement goals, you’re going to need to estimate how much money you will need to live off. Many people assume that their spending will go down after retirement, but if you’ve still got a mortgage or end up with medical bills, this is likely false. It would be best if you also were realistic about your expectation to splurge on travel or other items.
Calculate Needed ROI
Ideally, you want a retirement account that can cover your living costs without withdrawing from your portfolio, meaning that your investments’ return covers your spending needs. If your spending needs will be more than 10% of your portfolio total, that is unrealistic. Expecting a return on investment of around 5% is more realistic, so plan for and save towards a total portfolio that is enough that you wouldn’t be spending more than 5% ROI each year.
Assess Your Risk Tolerance
Even if you have years to invest, if riskier ventures make you uncomfortable, they aren’t for you. It would be in your best if you were comfortable with your portfolio’s risk, and only you can figure out what that means.
Plan Your Estate
Planning your estate should be part of figuring out your retirement goals. Many people hope to leave their children with something, but you need not spend all of your retirement savings for that to happen. Ensuring that you have the life insurance coverage, you’ll need to protect your family, and well-planned estate will ensure that your assets are distributed the way you want them to be.
Contact Bowman & Company Today
Bowman & Company CPA, PC provides all of our individual and small business customers with experienced, accurate, and affordable financial services. Our financial services aim to decrease your taxes and increase your net worth through responsible, timely, and accurate record keeping. We offer our services to clients throughout the Washington, D.C., metropolitan area, including Maryland and Baltimore County, Columbia, and Howard County. For more information on our offerings, contact us online or call us at (410) 381-8121. You can also find us on Twitter, Linkedin, Facebook, and Youtube.