Did you know that only 37% of Americans have an active 401(k) saving plan? Also, only 36% of Americans think that their retirement savings are on track.
Retirement may seem like a lifetime away. However, it’s never too early to start thinking about how you’ll support yourself when you’re no longer working.
You’ll be better off if you understand the retirement planning strategies that can help you make the most of your retirement savings. Planning for retirement will ensure that you have the retirement you’ve always dreamed of.
So whether you’re just starting to think about retirement or you’re already in your golden years, read on for some retirement planning tips that will help you make the most of your retirement.
1. Determine Much You Need to Save for Retirement
Deciding how much money you’ll need to save for retirement is one of the most important steps in the retirement planning process.
There are several factors to consider when making this estimate. These include your expected lifestyle in retirement, anticipated longevity, and inflation.
You can use a retirement calculator to estimate how much you’ll need to save. Most experts agree that you should save at least 10% to 15% of your pre-tax income for retirement.
If you’re already behind on your retirement savings, you may need to save even more.
2. Consider Your Retirement Income Sources
Your retirement savings will be your main income source during retirement. However, saving shouldn’t be your sole source of income. You can get additional income from other sources, so you need to consider them.
For example, if you are an entrepreneur, you may be able to sell your business when you retire and use the proceeds to supplement your retirement income. You may also have other investments, such as rental property, to provide additional retirement income.
You can also rely on a Simplified Employee Pension (SEP) retirement plan. This is a retirement plan for self-employed individuals and small business owners. A SEP retirement plan allows you to make tax-deductible contributions to retirement accounts for yourself and your employees.
Consider all the potential income sources to get a clear picture of how much money you’ll have to live on during retirement.
3. Choose the Right Retirement Savings Account
There are a variety of retirement savings accounts to choose from, and each has its own set of rules and benefits. You may not have a 401(k) that your employer matches if you’re self-employed.
However, you can use an IRA plan. An IRA is an individual retirement account that you set up and fund yourself. There are two main types of IRAs: traditional and Roth.
With a traditional IRA, you get a tax deduction for your contributions. This reduces your taxable income for the year.
You don’t get a tax deduction for your contributions to a Roth IRA. However, your withdrawals are tax-free in retirement. When choosing a retirement savings account, you need to consider your retirement goals and your current financial situation.
4. Invest and Diversify Your Retirement Savings
How you invest will depend on your retirement goals and risk tolerance. For example, if you’re close to retirement, you may want to invest more conservatively to protect your nest egg.
On the other hand, if you’re still several years away from retirement, you can afford to take more risks. You have time to recover from any losses.
No matter how much time you have until retirement, diversifying your investments is always a good idea. You should invest in various asset classes, such as stocks, bonds, and real estate.
This would be a good time to hire retirement planning services to help you make the best choices. Virtual CFO services will help you set aside savings and start investing for retirement.
5. Pay Off Your Debt
One retirement planning strategy that is often overlooked is paying off debt. Consider paying off your credit card debt, student loans, and mortgage.
Carrying debt into retirement can be a burden. It can also reduce the amount of money you have available to save for retirement.
If you can pay off your debts before retirement, you’ll be in a much better financial position. This will give you more money to save and invest for retirement.
6. Hire Retirement Planning Services
If you’re not sure how to plan for retirement, you may consider hiring retirement planning services. A retirement planner can help you figure out how much money you need to save and invest for retirement.
They can also guide you through choosing the right retirement savings account and investing your money. The services will act as your financial advisors and help you make the best decisions for your retirement.
A good financial advisor will ensure that your retirement portfolio is well-diversified and aligned with your retirement goals.
7. Scale Down Your Expenses
As you approach retirement, you may want to consider scaling down your expenses. This will give you more money to save for retirement.
For example, you can sell your home and downsize it to a smaller one. As an entrepreneur, you could choose a business structure that increases your tax efficiency to help you reduce tax expenses.
You may also want to reconsider your retirement lifestyle. If you plan to travel in retirement, you may want to purchase an RV instead of a second home. These changes can help you save money for retirement and live a comfortable retirement lifestyle.
Follow These Retirement Planning Strategies for a Comfortable Retirement
These are seven retirement planning strategies to consider when developing your retirement plan. Following these strategies will prepare you for retirement and help you achieve your financial goals.
If you’re an entrepreneur, retirement planning may seem daunting as you have to juggle between ensuring your business flows smoothly and doing enough to have a comfortable retirement.
That’s why you should let our financial experts at Bennett Financials handle your business’s financial aspects. Our experienced team will offer CFO services, tax planning, and bookkeeping services to help you focus on your retirement planning.
Contact us today to learn how we can help.