It’s never too early to start planning for retirement. The earlier you start, the more time you’ll have to save and invest your money. This quick guide will teach young adults the basics of retirement planning so they can get on track for a comfortable future. We’ll cover essential concepts like calculating how much money you’ll need in retirement, choosing the right investment options, and preparing for unexpected expenses. So whether you’re just starting your career or already well into it, read for some valuable advice on getting ready for retirement!
Calculate How Much Money You’ll Need in Retirement
One of the first steps in planning for retirement is estimating how much money you’ll need to cover your expenses. This can be a tricky exercise since it’s hard to predict exactly what your costs will be decades down the road. An excellent place to start is by looking at your current spending and extrapolating for inflation. Then, think about what kinds of expenses you might have in retirement that you don’t have now, such as healthcare costs or travel. Once you have a ballpark number, you can start working on a savings plan.
Choose the Right Investment Options
Saving for retirement is important, but where you invest your money is just as crucial. There are a lot of different investment options out there, so it’s important to do some research and decide which ones are right for you. A few things to consider are your risk tolerance, time horizon, and goals. For example, if you’re close to retirement, you might want to focus on preserving your capital rather than trying to grow it. On the other hand, if you have a longer time horizon, you can afford to take more risks in pursuit of higher returns.
Don’t Forget About Wills and Estates
You might not think that you need a will or estate plan, but if you have any assets or property, it’s important to have these things in place. A will allows you to designate how your assets will be distributed after your death, and an estate plan can help minimize taxes and expenses related to your death. While it’s not pleasant to think about, to learn more about putting a will and estate plan in place is one of the most responsible things you can do for yourself and your loved ones. If you die without a will or estate plan, your state’s laws will determine how your assets are distributed, which may not be in line with your wishes.
Prepare for Unexpected Expenses
No matter how well you plan, there’s always a chance that something unexpected will come up. That’s why it’s important to have an emergency fund to cover unexpected costs. Ideally, your emergency fund should be equal to three to six months of living expenses. This will help you cover things like a job loss, medical bills, or car repairs without having to dip into your retirement savings.
Retirement planning is a complex process, but starting early and educating yourself on the basics is important. By following the tips in this quick guide, you’ll be on your way to a comfortable retirement.