How to Plan for a Successful Retirement

In your day-to-day, you might be looking for ways to improve your quality of life. Eating well, for example, is a great way to maintain your health and continue living a quality life. Have you ever considered, though, that you can apply the same idea to your financial future? When it comes to long-term financial health, there is just as much of an opportunity to create healthy habits now that will help you in the future. That’s why we wanted to share a few tips with you on how to plan for a successful retirement.  

While it may be easy to contribute to your employer’s retirement plan and feel you’re doing enough, you may not be taking advantage of strategic ways to help ensure a healthy nest egg for retirement. Once you’ve walked through these four basics, reach out to a financial advisor to begin crafting a comprehensive strategy to potentially maximize your retirement account gains.

1. Determine Your Retirement Goals

In order to save for retirement, you first have to determine your retirement goal. A good rule of thumb is allotting 75%-80% of your current yearly income for annual living expenses after retirement. You should also consider the age at which you’d like to retire. Keep in mind that while housing and family care costs can go down after retirement, healthcare costs can go up. And don’t forget Social Security. Depending on your lifetime wages, Social Security can provide up to 40% of your retirement living expenses. It’s also worth considering what you want your retirement years to look like. If there are specific milestones you’d like to reach, such as paying off a home or establishing a trust, these goals should also factor into your total retirement savings. A financial advisor can help you reflect on both your financial needs and your financial dreams to determine an appropriate numerical goal for retirement.  

2. Calculate Your Estimated Annual Investment Amount 

Once you’ve outlined your general retirement goal, it’s time to get granular by determining your necessary yearly savings amount. First, map out your monthly, quarterly, and yearly living expenses. When compared to your annual income, how much of a remainder do you have that could be placed in an investment portfolio? You should also consider any savings you currently have in an investment account or an employer-sponsored retirement account. Chances are, you already have some savings towards retirement, so definitely include those funds while calculating your goals. For ease of calculation, there are multiple online calculators that can help you determine a ballpark figure, but a personal advisor can help you settle on an even more specific number.   

3. Diversify Your Investments 

Retirement savings can be placed in an IRA, a Roth IRA, a 401(k), or another pension plan. How do you know which retirement account type is right for you? This decision is often partially pre-determined by the type of retirement plan your employer offers. In fact, many employers may offer retirement fund matches, where they will invest an additional amount based on an employee’s contribution. Since many employer-offered retirement plans are also pre-tax, it may be a good idea to invest a large portion of your retirement savings into that account. However, you can also make use of additional options to diversify your investments. Diversification can provide confidence in your retirement savings. For instance, if your employer offers a traditional 401(k) savings program, you can also set aside additional funds (up to $6,000 in 2021) in an IRA or a Roth IRA account. Placing even small amounts into a secondary retirement plan can give you more options, flexibility, and control over your retirement savings.  

4. Find a Financial Advisor You Trust

While online tools and articles can offer you insight into retirement strategies, DIY research can’t compare to an intentional discussion with an experienced financial planner. Since every individual’s retirement goals are different, a reputable local financial advisor can provide you with options, ideas, feedback, and reviewing as you plan for your future. For retirement, you want to have an investment portfolio that is designed to provide a 3%-8% return, depending on the strength of the market. A financial advisor can also help you plan your disbursement schedule. Most retirees should plan on withdrawing around 4% of their retirement savings per year. Although this may differ depending on your individual situation.  

Ready to Meet With a Financial Advisor for Retirement Guidance? 

Preparing for the future is too important to leave to chance. At Southwest Investment Group, we encourage you to ask all your questions, receive helpful answers, and proactively decide on a strategy for your retirement savings. Take the first step today by meeting with an advisor for a retirement readiness assessment.  

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