Retirement is not something unknown or unheard of, yet its consequences often take an individual by surprise. The problem is that most employees prepare themselves for the “goodbye” mentally, but not financially. Employees must not solely rely on the retirement planning solutions provided by their employer, but should also take additional measures to ensure they can maintain their current standard of living even after they exceed the standard working age.
The first step toward planning for a stable life after retirement is to maintain a separate bank account from a certain percentage of your monthly earnings. This percentage must be based on a realistic estimate of one’s future expenses which may be different for every individual, depending on factors like whether they plan to purchase their property by the time they retire, or will need to continue paying monthly rent, or they expect any outstanding loans or other liabilities at the time of retirement. According to EBSA (Employee Benefits Security Administration), only 40% of Americans calculate how much they need to save for retirement, and probably this is the reason why they end up being financially vulnerable.
Understandably, the required amount might not be accumulated merely by taking out a certain portion of one’s earnings every month; while focusing on the ongoing expenses such as childcare, entertainment, or house expenses. Therefore, it is recommended to invest your savings in different projects through portfolio management to utilize idle cash while also minimizing the risk.
It is also important to learn about the Social Security benefits and remain updated with your earnings history to get an idea of the approximate amount you are entitled to benefit from, as part of the government’s retirement planning solution. Since this scheme reimburses 35 years of one’s highest pre-retirement earnings, it is very important to decide when one wants to start utilizing this benefit. You can monitor your current status and review your earning history by creating a free social security account (here).
Lastly, while making investment decisions and planning for retirement, you must remember how much time is left for the retirement to be effective, and the period that is required to receive the return on that investment. For those individuals who have enough time, investment options that have a higher risk, but also offer a higher return might be considered, but for someone due to retire in a few years, such a risk may backfire.
To summarize, the following suggestions may help you in retirement planning
- Maintain a separate bank account for retirement savings
- Estimate future expenses
- Invest in portfolio management
- Educate yourself about the social security benefit
- Take time into consideration before choosing an investment option
The key is to continuously monitor your retirement plans and savings, stay well-informed of the benefit programs offered by the government as well as the employer, and believe retirement planning to be essential for your future – rather than a buffer – that can be used for luxury purposes.