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5 Steps to Planning for Retirement in 2023: An Overview and How-to Guide

5 Steps to Planning for Retirement in 2023

Preparing for retirement now will help you keep living comfortably in the future. Neither you nor Social Security want to have to work forever. There are five stages to retirement planning: determining when to begin, determining how much money is needed, establishing priorities, selecting accounts, and selecting investments.

When you’re younger, financial planners typically recommend taking a more risky strategy to investing, but gradually reducing that risk as you get closer to retirement.

When can you Retire?

How soon you can retire depends on your desire to stop working and how much money you have saved up to do so. Social Security benefits cannot be received before age 62. Filing prematurely, though, will cause you to lose some of your benefits. Full retirement age (and full Social Security benefits age) for those born in 1960 or after is 67.

You can increase your payout by waiting as long as possible, up to age 70. Many people retire later in life, and some people retire earlier, depending on their personal circumstances. Many people prefer a gradual transition towards retirement rather than a sudden break from employment.

5 Ways to Prepare for Retirement

The eventual goal of retirement planning is to have enough money to stop working and do what you want to do with your life. This retirement planning guide was written with the intention of assisting you in reaching that objective.

1. Know when to start retirement planning

How soon before retirement should you begin saving? You decide, but the sooner you start saving, the more time your money will have to grow. However, you shouldn’t feel like you missed the boat if you haven’t started planned for retirement yet. It’s never too early to start saving for retirement, even if you haven’t given it much thought. If you invest wisely, you may not have to play catch-up for as long.

Additional articles on money are available at the links below; feel free to peruse them at your leisure:

2. Figure out How Much Money you Need to Retire

How much money you’ll need to retire depends on your present income and expenses, as well as your expectations for how much those expenses will change (or not) when you stop working.

Michelle Singletary, a contributor for the Washington Post, recommends that retirees create a budget to account for the fact that they will still want to travel, eat out, and possibly pay for repairs to their vehicles and homes.

n retirement, most experts recommend replacing 70% to 90% of your annual income before you stop working with your savings and Social Security. A retiree with a pre-retirement annual income of $63,000 can estimate needing $44,000 to $57,000 per year in retirement.

3. Prioritize your Financial Goals

You undoubtedly have other financial objectives besides retirement. Paying off debts like credit cards and student loans or amassing an emergency fund are priorities for many people.

Retirement savings should be prioritized alongside emergency savings, especially if your employer offers a retirement plan that matches a percentage of your contributions.

4. Choose the Best Retirement Plan for You

Determining not just how much to save but also where to save it is a fundamental part of retirement planning. Start with your employer’s retirement plan if they offer a 401(k) or other retirement plan with matching funds. Individual retirement accounts are available to those who do not have access to an employment retirement plan.

While there may not be a “best” retirement plan overall, there may be a “best” plan (or set of plans) for you. In most cases, the best plans will offer tax breaks and, if possible, a matching contribution or other savings incentive. That’s why a 401(k) with an employer match is often a good first step for many people’s retirement savings.

Some employees aren’t receiving their fair share of the bonus cash. According to Section 101 of the Secure 2.0 Act , workers of color and those earning lower wages are less likely to join in their company’s retirement plan. To encourage greater involvement in retirement plans, a new feature in the bill mandates automatic enrolment.

If you are seeking for the best options for additional retirement savings and either don’t have access to a workplace plan or your employer doesn’t offer a match, an individual retirement account (IRA) may be the way to go. This is a plan that you establish on your own through a bank, credit union, or internet broker. You can’t really call an IRA a consolation prize.

You can read more financial articles by following the links provided below:

You can find seven potential retirement strategies below. Follow the provided links to learn more about how each option functions:

5. Decide Where to Invest Your Retirement Funds

You can invest in stocks, bonds, and mutual funds using your retirement account. How long you have until you need the money and your tolerance for risk are two factors to consider when deciding what kind of investment portfolio is best for you.

The conventional wisdom is that one should invest actively when young, shifting to a more conservative portfolio as retirement nears. That’s because your nest egg should expand substantially thanks to the stock market’s historical pattern of long-term development, and you have many years for your money to weather market changes.

Retirement planning is an ongoing process that adapts with you as you gain or lose experience, add members to your family, see the stock market rise and fall, and approach your retirement date.

Your investments may or may not need occasional attention. Investing in a small number of low-cost mutual funds is all you need to take charge of your retirement resources. If you’d rather have an expert guide you, financial advisors are available.

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