How to Create a Rock-Solid Retirement Plan

It’s never too early to start a retirement plan, but where exactly does one start? From retirement communities to 401(k) plans, it can be overwhelming to sort through the options and decide how to spend the later years of your life. Thankfully, becoming the boss of your golden years can be much easier with critical thinking and just a little research. Remember: golf courses are optional.

Start Saving Now

The best way to plan a solid retirement is to start saving for it, preferably now. If you’re young, it’s the best time to start planning for retirement expenses. If you’re middle-aged, there’s still time. There are many types of plans for employees and self-employed individuals alike.

401(k) and 403(b)

The best way to take advantage of retirement savings is to understand what pre-tax savings options are available, like a 401k plan. These pre-tax plans allow you to use your pre-tax income for retirement savings, which lowers your taxable income, saving you money during tax season, too! A 401(k) is a savings account contributed by you (out of your wages) and your employer with tax benefits, allowing you to maximize retirement savings. You can also contribute to a 403(b) retirement plan if employed by a school, church, or tax-exempt charity; they are essentially the same as 401(k) but offered by non-profit or government organizations.

Traditional IRA

A Traditional Individual Retirement Account (IRA) is similar to a 401(k) in that you contribute pre-tax dollars. However, withdrawing from the account during retirement (after age 59 ½) is taxed. Essentially, the funds are taxed after retirement instead of before.

Roth IRA

Plans like a Roth IRA will enable you to save for retirement with after-tax wages; if you withdraw from the account after age 59 ½, you don’t have to worry about taxes or penalties.

Pensions

Pensions are similar retirement funds that do not feature as much control over contributions, but wages are taken out to ensure a monthly payment during retirement. A financial advisor can walk you through your options, and you can quickly determine the best options for your goals. Not all employers offer pensions or other retirement plans.

Research Housing Options

There are many retirement living options available to older adults. You can live at your home (or downsize to a smaller one, as you’ll likely have an emptier nest). You can move to a senior independent living community, where food and amenities are available without worrying about housing repairs or lawn care. Assisted living and nursing homes are options for those who may need more hands-on medical care or assistance later in life due to conditions like cancer, Alzheimer’s, or physical disabilities. Depending on your current age, it may be impossible to know if you’ll need assisted living as you age. However, assisted living and nursing home communities tend to be pretty pricey, so thoroughly factor that into your retirement savings to prepare for all options.

Know Your Rights

You’ll need to know your rights no matter what you choose to do or where you’ll go during retirement. As adults get older, their physical or mental capabilities may naturally decline, particularly after dementia or Alzheimer’s diagnoses. These conditions may leave you vulnerable to the care of others, so retirees or their family members must do their due diligence and thorough research when selecting any healthcare provider or care facility. You can also consult with experts and attorneys, like the Nursing Home Law Center, to protect your rights as an older adult or nursing home resident.

Plan Your Estate

It’s never too early to plan your estate. Will you be buried, cremated, or some other option? Create a living will and designate your last wishes and assets to a loved one or charity. Children or spouses are common choices for heirs to an estate. It may seem a bit morbid, but preparing in advance can help you enjoy a comfortable and secure future for you and your loved ones. You can also take out a life insurance policy if you want the beneficiary to be financially comfortable in worst-case scenarios. You can always change your will when circumstances change, so there’s no reason to wait.

Establishing Priorities

Figure out what you may want to do when you retire. Some older adults enjoy traveling the world, and others enjoy sitting at home and finally relaxing for once. You can do a mix of both, but traveling can be expensive, so make sure your retirement savings plan for these types of trips. Will you want to work a little bit, or not at all? Working can generate some additional income for yourself, but you won’t have as much free time to relax and enjoy your retirement.

Get a Financial Advisor

Financial advisors can help you budget and sort through your retirement plan options to determine what is feasible for you. You can inform them of your retirement goals (no matter how vague) to provide them with a better estimate of how much to save for retirement. Financial advisors are helpful during any life stage or financial situation, not just retirement.

Get Out of Debt

Paying off debts allows you to contribute more to savings without worrying about paying off credit cards, loans, or mortgages. Obviously, some debts are long-term and can’t be paid off as quickly (like student loans or a mortgage). However, if you have some outstanding credit card debt, work to pay it off. The more expendable your income, the more comfortable your life and retirement will be.

Conclusion

Planning your retirement at any age can be confusing and stressful. However, understanding retirement plan options, budgeting your finances, and paying off debt can make things easier. Decide what retirement might look like to understand better how much to save. Plan your estate to make life and retirement more straightforward to manage regardless of circumstances.