5 Steps to Retirement: Your Roadmap to a Comfortable Future

When you’re 25 years old and starting your career, planning for retirement isn’t a primary concern. You have plenty of time, at least another 30 years until you’ll retire, and sometimes longer than that, depending on your profession. You’ll think about what you’re going to do later in life when retirement is more than just a fleeting idea that doesn’t seem quite real yet.

But before you know it, the years have slipped on by, you’re going to be retiring in less than ten years, and you have no idea what you’re going to do. How will you ever acquire enough savings to sustain a comfortable life from retirement after that?

This is a common situation that many, unfortunately, find themselves in. If you want to leave the worry behind and find solace in knowing that you’re going to be financially stable in the future, follow these 5 easy steps to retirement planning.

Establish How Much You Need

Before you even start to build a savings, you need to know how much you need to be saving, and how long it’ll take you to save it. First, you need to figure out how much of your current income you need to support your cost-of-living.

Generally, people live off of 80 percent of their gross annual income, so that’s a good place to start. Though, be wary that you may spend more or less of your income, depending on your lifestyle and what you consider necessities rather than luxuries. Basically, a person that makes $80,000 a year, but only spends $50,000 a year, will have a vastly different retirement savings than someone who spends $75,000 of that $80,000 per year.

And when you’re determining just how much money you’re going to need to be setting aside to enjoy your retirement to the fullest, remember to account for current expenses that may no longer be a concern, such as a paid off mortgage. But while you’re considering for those freed up monies, remember that there will be additional costs that come with retirement, such as healthcare costs and extensive travels.

Once you’ve figured up what you need to have yearly to live comfortably, multiply that number by 25. Now you’ve established your end goal.

Determine What Social Security Will Pay

Thankfully, you won’t need to come up with all that cash just through your retirement savings alone. One of the benefits of retirement is that you finally get to cash in on that Social Security and reap the rewards of being a lifetime contributor to the lump sum. When you qualify to draw Social Security, you’ll receive a check once a month to go toward your monthly expenses.

But, what most may not realize, the amount of Social Security you will receive is not a locked down number, so you’ll need to figure out how much you qualify for and what that looks like on a monthly basis.

While you won’t be able to find out the exact amount you’ll be receiving each month, you can go to the official Social Security website and use their estimator tool to get a rough idea of how much you’ll collect. Don’t forget to subtract this figure from the total annual income you’ll need during retirement.

Build A Savings Plan

Here comes the fun part. So you’ve determined your yearly sustainable income, how Social Security factors into that, and what that rounded out number per year is that you’ll need to start stocking back. You’ve crunched the numbers, double and triple checked, and now it’s time to put that plan into action. Say hello to your official retirement account!

If you’ve already established a savings account and have built up any amount whatsoever, you’re already ahead of the game. You can even use that account to start building up your retirement fund. Just take your current savings and subtract it from your needed retirement fund to determine how much you have left to save. Then, to make things a little easier, take that lump sum and divide it by how long you have built that savings fund before your expected retirement date.

But if you don’t already have a savings account established, don’t worry! Just go open one up and divide your retirement plan by the number of years you have until your expected retirement and start saving. Remember, as long as you’re saving, that’s what is most important.

Invest Savings

While this isn’t necessarily a requirement, if you want to stack up more cash without having to take extra out of your monthly checks, it may be wise to look up ways to invest your funds.

There are dozens of options available for you out there. It’s just finding the right one that fits your needs, wants, fund size, and will be beneficial to your retirement date in mind.

You can easily stick to a savings account, but get one that draws annual interest. This isn’t going to garner a mass amount of funds, but it’ll give you a little more than what you are anticipating. Of course, there are other savings funds available through various credit unions and banks that are geared toward retirement savings that you can look into. It all just depends on where you bank and how you want to store your funds.

Another popular option is looking for a low-cost provider, such as Vanguard, that will set you up with a saving selection and professional asset allocation, i.e., bonds and stocks that come at a reasonable cost. If you go this route, someone does the work for you, and you don’t have to be an investment professional to properly invest your money. But it’s all about what works best for you and what you’re most comfortable with doing.

Start Now

This may seem pretty straightforward but, like mentioned before, you’d be surprised how many people don’t see the need and benefit of starting their retirement plans early. Waiting until you’re ten years from retirement may seem like plenty of time. But the truth is that, when you’re planning for 25 plus years of not working, you need all the time you can get to stock up and prepare yourself so you can enjoy the relaxation of freedom that comes with retirement without worrying about financial stability.

The sooner you start saving and planning for your retirement, the easier it will be to build up your savings and, inevitability, the easier it will be after you retire. It may seem like a daunting task, but take each step at a time and remember you can always revisit your retirement plan as the years go by, but it’s better to be safe than sorry.

Make the most out of your retirement and enjoy it the way you’ve always dreamed. Start saving today!