Retirement planning is a broad term. What is it really? Is it about understanding how your pension plan works, saving money and investing, or planning how to minimize tax consequences of retirement income? The thing is, it’s all of these things and more. What you need to keep in mind, however, is that retirement planning differs greatly on what life stage you’re in.
About 20 years before retirement
Focus on life retirement planning to better gauge how you should plan your financial retirement plan. Think about what you wish to do while you’re in retirement — traveling, playing a sport, or taking up a hobby. Having an idea of what you plan to do when you’re retired would help you put away ample money for your future. It’s best to start young while time is still on your side.
Around five years before retirement
Now’s the time to predict your future income projections to determine how much income you are most likely to get while retired, advises some of the leading independent financial consultants in the state. This means doing an inventory or your assets and organizing them to make realistic income projections.
You need to be aware that some of your short-term decisions could have serious, long-term implications. Think about what you plan to do with your government benefits, the specific type of pension plan for your needs, and possibly converting some of your assets into retirement income. This is also the ideal time to examine your assets’ longevity based on particular return rates and income levels.
While in retirement
It’s now all about being efficient and perhaps fine-tuning some of your plans. In general, this includes managing assets and making them work for you as well as tweaking some things to reduce taxes while maximizing your income.
The main takeaway is this — retirement planning is extremely crucial regardless of age and life stage. The earlier you start planning for retirement, the better. The closer you approach retirement, the more detailed your plans should be.