Whether retirement for you is decades away or just a few years away, there are things you can do now to have a more successful retirement. It starts with knowing what you want your ideal retirement to look like. From there, it’s all about effective planning. Here are 10 must-do steps to do now to prepare for retirement:
- Define Your Ideal Retirement
In defining your ideal retirement, there are a few key things to consider. Top of the list is at what age you’d like to retire. Do you want to retire early and live off your personal savings before tapping into your retirement benefits? Do you want to do a phased retirement in which you work part-time before ultimately not working at all? Or do you want to go the traditional route and retire around age 65?
Another thing to consider is where you want to live. Do you have children that are willing to have you move in with them? Do you want to live in a retirement community? Or do you want to stay in your current home?
- Eliminate Debt
Although eliminating debt should always be a financial goal on your list, it becomes more and more important as you near retirement. This is because bringing debt into retirement can reduce your standard of living. A smart thing to do is to only take on debt you know you can afford to pay off before you retire.
- Save Money in an Employer-sponsored Retirement Plan
If your employer offers a retirement plan, this is the first place you should look at saving money for retirement. Not only do 401(k)’s/403(b)’s offer tax savings, they generally make saving easier because the money goes directly from your paycheck into the retirement plan account. Some employers even offer matching funds. If your employer offers matching funds based on how much you contribute, make sure you contribute how much is needed to get the full match.
- Save Money in an Individual Retirement Account
The next step is to save money in an individual retirement account, such as an IRA or Roth IRA. Both accounts are similar, but there are some notable differences. Contributions to an IRA are tax-deductible, saving you money now. The withdrawals in retirement are taxed. Contributions to a Roth IRA aren’t tax-deductible. The withdrawals in retirement are tax-free, saving you money in the future. Both accounts have contribution limits set by the IRS. Roth IRA’s also have income limits for eligibility to contribute.
- Buy a Home You Can Afford
On the note of being debt-free, not having a mortgage payment you’re responsible for in retirement makes a huge difference. Of course, you don’t want to buy a home until you’ve done your due diligence such as finding a city you’ll live in for more than five years and saving for a down payment. Once you’ve done those things, consider buying a home you can afford. If you purchase early enough, you can realistically be mortgage-free in retirement.