Establishing a comprehensive retirement savings plan is both necessary and complex, due to all of its unknown variables. No one ever gets it exactly right; adjustments may need to be made over time. But it is crucial that your initial retirement savings plan be as efficient and comprehensive as possible.
At some point, in order to accomplish this task, it’s advisable to consult a financial advisor or investment specialist experienced with retirement portfolios. It may also be worthwhile posing some key questions related to your own financial outlook and plan.
Start here: Here are five.
1. What Will Retirement Look Like?
As part of our prior post on how much money it takes to retire comfortably, we addressed the importance of creating your ideal retirement scenario. Specifically, we asked about your lifestyle goals once out of working and your plans for time spent retired – together, these factors help create an idea of what your desired retirement should entail.
As this is such an expansive topic, the initial question you should pose to yourself should largely involve imagination (within reason). What age and where would you like to retire at? Are there any specific places or activities that appeal to you? Before getting too involved with finances and plans for retirement, take some time to brainstorm a vision of what you would like out of retirement.
2. Where Should You Invest Your Capital?
This question requires more thought, and one which should ideally be discussed with a financial advisor or investment manager (unless of course you possess personal expertise in this area). However, sensible retirement investing does tend to follow some generalized guidelines; most notably the “Rule of 100,” a straightforward method for balancing risk by subtracting your age from 100 and using that number as the percentage to be invested into riskier assets such as stocks and commodities versus safer areas like cash and bonds.
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At an ideal, younger investors give their portfolio more time and potential for growth; older ones should protect more of their assets. Of course this is only an approximate guideline, so please seek professional advice as part of a holistic strategy plan for best results.
3. What Are the Main Financial Changes That Will Occur?
At first glance, retirement can seem like a relatively austere endeavor: saving and investing are used to ensure there will be enough money available for living expenses without an income stream during what can be a relatively lengthy period of our lives. What we don’t often take into account, though, are any significant financial changes which could arise upon entering retirement: such as selling your family home to move into smaller living quarters for instance.
Are You Researching Retirement Destination Countries and Thinking About Spending Some Years Abroad? Doing research for retirement destination countries and contemplating spending some years overseas can be daunting, yet exciting at the same time. Perhaps buying that special car you always wanted when retiring will come true; or purchasing season tickets to your favorite sports team’s games are major financial changes that should be factored into any plans – for instance selling home proceeds could bring additional revenues that should be considered when budgeting loosely for these major lifestyle changes.
4. What Tax Considerations Should Be Made?
As taxation during retirement varies depending on which country a retiree lives in, there’s no one-size-fits-all answer available. Retirees often need to pay taxes on income from sources like pensions and withdrawals from retirement savings plans.
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Naturally, any additional income earned as part of retirement planning must also be taxed as it would for anyone else (for instance if a hobby becomes part-time employment). Taxation rules tend to be straightforward for retirees but should still be factored into your planning strategy.
5. How Much Should You Set Aside?
As it relates to saving, one of the key questions is “how much” should be saved for retirement. This doesn’t refer to how much you’ll ultimately require; rather, it should set aside a percentage of your income that will contribute towards long-term security.
Savings should start to accrue at about 10-15% of income once beginning in one’s 20s, though this number can differ depending on when and how one starts saving, their income situation, and plan details. Still, do your best to select an amount and stick to it as best as you can.
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