Set a Budget
You need to know the amount you spend every month in order to estimate the amount you will be spending monthly after you retire. In order to do this, you need to keep track of your expenses and follow a budget. You may not want to spend your entire life depending on a budget, but having a budget can help you significantly by giving you an idea of how much you can spend on recurrent expenses within a month.
Determine Your Net Worth
If you have not determined your net worth yet, it is time that you do. Make sure to include your negative assets when calculating your net worth. You should also consider your debts or mortgages. Before retiring, make sure to repay all your debts. It is never positive to reach your retirement age with a lot of debts to pay off.
Join a Retirement Plan
If your employer offers a retirement plan, grab it. Most employers today offer 401(k) plans. Such plans have a high contribution limit and your contributions will go into your plan on a pre-tax basis. Most companies also provide a matching contribution, which means free money invested into your retirement. In case your company does not offer retirement plans, you can use the IRA. There are three kinds of IRAs to pick from – Contributory IRA or Traditional IRA, Non-Deductible IRA and Roth IRA.
Traditional IRA is deductible from your income and your income grows tax deferred. Minimum distributions are also required when you reach a certain age. Distributions are taxed as regular income and Non-Deductible IRA is not deductible from your income. Wages grow tax deferred and there is no minimum distribution requirement. With Traditional IRA, you pay taxes later. With Roth IRAs, you pay taxes now.
You should start saving as early as now and start saving some of your wages each month. You should also consider investing and try to own as many different kinds of assets as possible. Consider ETFs or mutual funds. Don’t forget to help your portfolio grow by always contributing to your retirement plan. Avoid taking early withdrawals particularly from IRAs or 401(k) plans as you won’t just have to pay taxes on the amount withdrawn, but you’ll also be charged with a 10 percent early withdrawal penalty.
Check your Investments
Checking your investments yearly is important, as it allows you to monitor how your money is doing. You can also make changes if needed, like rebalancing your portfolio and eliminating lagging investment choices. The Retirement Planning Group can help you to plan your retirement. Call them today and expect an expert to help you create the right retirement plan for you!