Retirement planning is the preparation one does for life after they stop working. It involves utilizing sources of income and budgeting to help maximize the amount you are able to save, managing risks and assets and other forms of financial planning.
Ideally, it begins as soon as one begins working and continues until they retire. However, not everyone starts planning early in life, and you can begin at any age. Understanding what retirement planning is, who it is for and what professional assistance may be necessary can help you decide if it is right for you.
Aspects Of Retirement Planning
The goal is to help maximize income potential and total worth and reduce unnecessary costs to allow for more retirement savings. However, planning is about more than how much you bring in and your expenses. Other common aspects that are included in retirement planning are:
- Individual Retirement Account (IRA)
- 401(k) plan
- Stocks and investments
- Property ownership
- Insurance
- Estate planning
- Tax planning
Every retirement plan looks different. Each individual should evaluate their own financial situation to determine the most important aspects to include in their plan.
Plan For The Future
Retirement planning in simplest terms is planning for the future, specifically life after work ends and there is no more base income. Successful retirement planning should include understanding exactly what your current income and revenue streams are and what your expenses are.
For many, income includes more than the salary from their employer, and it may include stock, real estate properties, and other types of investments that produce income (or potential loss). It may also include a way to maximize wealth and project future wealth through calculations of interest over time and other more predictable financial factors.
Planning for the future should also include expenses and debt. This may include mortgage payments, student debt, credit card debt and healthcare expenses. Creating a plan to pay off all expenses and debt on time can help prepare for a secure and comfortable retirement financially.
Setting Goals Along The Way
Another key component of planning for retirement is setting realistic and attainable goals along the way. As discussed, retirement planning should ideally begin while in your 20s or 30s, although it is never too late to begin.
The first goal to establish with retirement planning is how much you need to save, a goal that is far too often neglected or misunderstood. You may have heard that you need $1 million to retire, but applying a generic number to how much you will need is rarely a successful strategy. Instead, we recommend calculating how much you need by using the 80 percent rule.
Life-Long Process
As discussed, retirement planning should begin early in life and last until retirement. Of course, the ability to contribute to a retirement plan will increase over time as you progress in your career and earn more income. Also, your desires may change over time as well, which may alter your planning strategy as well.
A change in the planning strategy is common and to be expected. Subsequently, planning can be broken down into three different stages — the early, middle and late stages of one’s professional career. Every person should have a unique strategy that matches their needs, but common goals for each stage include:
- Early stage – Early stage retirement planning is for people under the age of 35. Most are not able to save as much as they would like early in their professional career, but putting some money towards retirement each month can ensure you take advantage of compound interest, which could potentially make you three times as much than if you were to invest in the middle stages.
- Middle stage – Middle stage retirement planning is for people between the ages of 36 and 50. During this stage, you may be able to set aside more money each month, along with finding additional revenue streams aside from your base salary (stocks, investment properties, etc.).
- Late stage – Late stage retirement planning is for people over the age of 50 until retirement. During this stage, the focus may become more about lifestyle choices you want to make after retirement than it is increasing the amount you are able to save each month.
The earlier you start planning the easier it is to save money. A wealth management advisor can help with each step of retirement planning to help maximize savings and reduce risk of savings loss through unexpected payments, taxes and more.
Work With The Retirement Planning Professionals
Here at Campbell Wealth Management, we pride ourselves in helping clients prepare for retirement. If you would like to learn more about retirement planning, request a consultation with our experienced team today. We will be glad to answer your questions and get you started in your retirement planning journey.
