9 Ways to Plan for Retirement

plan for retirement

Plan For Retirement

1. Save as much as you can as early as you can.

22%  of Americans have less than $5,000 in savings for retirement, according to new data from Northwestern Mutual’s 2019 Planning & Progress Study.

Another 5% have between $5,000 and $24,999 put away and only 16% have saved $200,000 or more. 46% of respondents say they don’t know how much they have saved for retirement.

2. Set realistic goals. Save at least 15% of your income. Setup an emergency fund of 3-6 months, then start investing after you payoff your debt. Some debt can be really expensive and some can be cheap. Take this into consideration when setting up your retirement plan.  Use a retirement calculator – here are 12 retirement calculators.

3. A 401(k) is one of the easiest and best ways to save for retirement. If you have a 401K available to you then make sure you take advantage of it as it is free money. 

4. An IRA also can give your savings a tax-advantaged boost.

An IRA can be an awesome tool to help you save for your retirement. The money you invest in it can grow tax deferred until you retire. 

5. Focus on your asset allocation more than on individual picks.

Asset allocation is an investment strategy that aims to balance risk and reward by apportioning a portfolio’s assets according to an individual’s goals, risk tolerance, and investment horizon.

6. Stocks are best for long-term growth.

The historical average stock market return is 10%. Currently, investors can expect to lose purchasing power of 2% to 3% every year due to inflation. The stock market is geared for long-term investments,  money you don’t need for at least five years. Plan for Retirement.

7. Don’t move too heavily into bonds, even in retirement. It depends on your risk tolerance.

One good rule of thumb is to subtract your age from 110. This is the percentage of your portfolio that you should keep in stocks, with the rest in bonds. For example, if you’re 40 years old, stocks should make up roughly 70% of your portfolio, and the other 30% should be in bonds.

Risk tolerance is an investor’s ability to psychologically endure the potential of losing money on an investment. A person’s risk tolerance can change throughout his life and determines what type of investments he or she is likely to make.

8. Making tax-efficient withdrawals can stretch the life of your nest egg.

9. Working part-time in retirement can help in more ways than one. Even making a small income can stretch out your savings. 

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