Many people have unique fantasies about their lives after retirement. Some want to travel the world, while others dream of settling down in a peaceful town. Whatever your dream may be, you must prepare for it.
A comfortable retirement must be the target of everyone. Despite not working, you can still live a comfortable life after retirement if you prepare for it carefully.
You can only consider your retirement a “comfortable” one if you can provide all your needs without facing financial problems. Aside from your needs, you could also buy leisure and luxury items such as electronic devices or vacation tickets.
Still, comfortable retirement can be a subjective topic. People have their own definition of what is “comfortable.” Do you want to retire to a beach house with a beautiful ocean view? Do you dream of retiring in an Asian country? Do you want to live in luxury and wealth? Whatever your idea of a “comfortable retirement” maybe, only you can achieve it through proper planning.
However, achieving this isn’t a walk in the park. There are many factors to consider that require strict decision-making and guidance. Truth be told, but you need money. You’d need to pay the bills even after you retire – this is inevitable. You need money to buy food every day. You also need it for repairs or for gassing up your car.
But, money is something you couldn’t earn easily after your retire, and that’s why you need to be ready for it.
How much income do you need for a comfortable retirement?
Every year, the prices of necessities increase. This includes food, water, clothing, medicine, and electricity. Thinking ahead would help you determine how much money you’d need after you retire.
But you must ask yourself this question, “Am I making enough now to secure my retirement in the future?”
If you’re only trying to make ends meet with what you’re earning right now, chances are that you won’t get the comfortable retirement you deserve.
You should earn enough money that would let you live a comfortable life in the present while having extra earnings for your savings.
You need to compute how much yearly you would need after you retire. Consider the utility bills, food, medicine, and other needs after retirement. That’s how much you’d need to save up.
If you’re not saving enough money. You may want to consider getting a job that would give you financial stability now and in the future.
Saving won’t require you to get a high-paying job. For example, if you start saving at 25 years old, you’ll have 40 years to save for your retirement at 65. If you start later than that, you’ll have less time to save so you’d need to earn more to save more.
How much does a couple need to retire?
When you’re married, you’d need to plan your retirement more carefully. You’ll both suffer if you don’t play your cards right in the beginning. You may still have a lot of other things on your mind, but your retirement should also be on your priority list.
For couples who both have jobs, it’ll be easier to save money. You and your partner can save up individually or together. You can plan and set a goal on how much both of you should save up to retire comfortably.
But for couples who only rely on one person’s income, it could be tough. As mentioned above, you need to save money based on computation, including basic needs. For married couples, savings should be doubled.
For example, instead of saving 10% of your total earnings every month, you may need to save 20% of it or more. Nowadays, couples should work together to accumulate as much savings as they can to live a comfortable retirement.
Doing different means to earn extra income is essential for every couple. But, couples also need to consider changing their perspective of a “comfortable retirement.”
For people who retire alone with continuous savings, they may have the luxury of spending on other things apart from their basic needs.
But, changing your mindset and goals is another way of reaching a comfortable retirement. Couples may need to settle for a much simpler retirement. Still, a simple retirement doesn’t mean it’s uncomfortable. It could still be comfortable without traveling or buying new furniture every year.
You must talk and plan your retirement with your spouse. If needed, you must help each other for you to achieve your well-deserved retirement with ease.
Will your retirement income be enough?
Saving money isn’t the only way to reach a secure and comfortable retirement. There are different kinds of retirement income sources that you can also look into. This can help reduce the money you use from your savings.
Here are the different types of retirement income you can use in the future:
This is a type of retirement plan offered to employees of most companies. You can contribute a part of your paycheck to investments. This also helps reduce the taxable income from your annual earnings.
If you earn $50,000 and contribute $4,000 to 401(k), you’ll only be taxed on $46,000.
The investments you made in 401(k) is tax-deferred up until your retirement. Keep in mind that withdrawing the funds early would only penalize you.
Individual Retirement Account
An IRA is another way to get enough money for your retirement. You invest in an account that you can use for bonds, mutual funds, and stocks. Decisions for the investments fall on your hands unless you hire someone to do it for you.
This has similar rules with the 401(k). You shouldn’t withdraw the money before the recommended retirement age. Your investment would also be removed from the taxable amount from your paycheck.
Once you’ve maxed out your 401(k) for the year, you can invest in an IRA. This is also an option if your company doesn’t offer a 401(k) plan. However, there’s a contribution limit, which depends on your age.
There are other branches of the 401(k) and the IRA which you can invest in.
- Roth 401(k)
- Roth IRA
- Savings Incentive Match for Employees IRA
- Simplified Employee Pension IRA
Social Security Retirement Benefits
If you’ve worked at least 10 years, you eligible for Social Security retirement benefits. You can get a monthly pension from the Social Security Administration.
Your monthly pension would depend on the total number of credits you accumulate. The longer you work, the more credits you earn. You won’t get any benefits if you have less than 40 credits.
You must use these retirement plans wisely to maximize your savings and the benefits. If you’re not married, try to get benefits from all retirement income sources you can apply.
For couples, mix-and-matching the benefits would also be a good idea. That’ll give you different options and sources when both retire.
This common retirement income sources may not be enough for you to depend on them. You’d still need savings. However, there other ways of creating income during your retirement. Some of these include:
- Renting out a room in your house or a vehicle
- P2P (peer-to-peer) lending
- Credit card rewards
- Cash-back applications
- Writing and selling e-books
- Selling photos online
Starting any of these money-generating options may help you in achieving a comfortable retirement. Passive income can supplement your retirement income and savings. Start planning your passive income early to earn more over time.
Becoming financially literate is a must to ensure a happy and comfortable retirement. It can be a daunting task, especially for young workers. But, it’s something every person must do.
Financial planning helps you focus on your goals so you can invest and save for them. It also ensures that you don’t only work for money, but money also works for you. It lets you put your finances on track by maximizing all your hard-earned dollars.
You can hire a professional to plan this for you, but you must also understand it. You must understand “why” you’re planning and “how” to plan. It involves these steps:
- Knowing your goals
- Collecting your finance information – your net worth, spending, debts
- Contrasting the goals with the finance information
- Creating plans – short-term, medium-term, long-term
- Doing the plans
- Adjusting depending on unexpected events
Here’s a retirement calculator that can help you with financial planning.
Nothing’s worse than being an old retiree without anything. It’s sad to think about living the last days of your life in hardship. That’s why you must start planning for your retirement now.
A comfortable retirement doesn’t mean that you’ll be living like a millionaire after working 9-5 for many years. It means that you’ve achieved a happy, content, and worry-free retirement.
You can only make it happen if you plan ahead. Instead of carpe diem, say, “Today’s tears, water tomorrow’s gardens.” All your hard work and sacrifices will pay off in the end.
If you think that it’s too late, don’t worry. It’s never too late to start saving and planning for your future.