Some people see themselves retired on a beach. Others are traveling the world or fishing in the woods. Whatever it is, it works for them.
That’s also a great way to approach retirement planning — make it your own. Here are four steps to building a retirement plan that works for you:
1. Choose a target age and amount
The average retirement age in the United States is around 63.1 Your target age could be different for a variety of reasons, such as income, family or life events, but it’s important to choose one. It’s also important to note that 62 is the earliest you can start receiving your Social Security benefits.2 To learn more, check out the Social Security Administration’s chart on Benefits by Year of Birth.
The next thing to consider is how much money you want to have when you retire. Like your target age, this number has its own variety of circumstances like long-term care and expected lifestyle. If you need help determining a dollar amount, review these suggested retirement savings targets and try using the U.S. Department of Labor Retirement Savings Worksheet.
2. Think about where your savings will go
If your employer offers a 401(k) plan, especially one that matches your contributions up to a certain percentage, this could be a great option. It can also be a simple way to save, as most companies will automatically deduct the amount you choose from your paycheck and deposit it into your retirement plan.
If your employer doesn't offer any plans, there are other options you can set up on your own. Individual Retirement Accounts (IRAs), such as Roth IRAs, are retirement accounts you can open yourself or with the help of a bank. For detailed information on over a dozen options, check out this list of retirement plans by the Internal Revenue System (IRS).
3. Find extra ways to fuel your savings
If you’ve been looking for a reason to save money and stick to a budget, stuffing your retirement fund is a great one. Most plans use compound interest, which allows you to build interest on top of interest. This means the more money you put in now, the more interest can grow over time.
To find extra money to put toward retirement, review your current budget and look for ways to save. If you don’t have one yet, follow these tips to create a budget. Once you have an idea of where you can cut back, put your foot down and make it happen. If you need some suggestions, try these ways to save money every day.
4. Set an annual date to review your plan
Before you set your retirement plan in motion, pick an annual date to check on its progress. It could be January 1, the day you started your plan or another date you’ll always remember. The important thing is you choose one day to sit down to review the past year and see if you notice new opportunities for growth.
If you would like guidance in reviewing or updating your retirement accounts, consider hiring a financial advisor. They will most likely charge a fee, but if you find a path to saving more money for retirement, your profits could end up being a lot more than the cost. Here are some suggestions of what to look for in a financial advisor.
Give yourself peace of mind
There are many smart ways to save for retirement. However, retirement planning can be different for everyone, especially if you’re self-employed or don’t have plans available through work. But if you make a plan that works for you, and start early, you can begin looking forward to your own version of a happy retirement.
1 Anspach, Dana. “Average Retirement Age in the United States.” Thebalance.com.
https://www.thebalance.com/average-retirement-age-in-the-united-states-2388864 (accessed May 23, 2019).
2 Social Security Administration. “Benefits by Year of Birth.” SSA.gov. https://www.ssa.gov/planners/retire/agereduction.html (accessed May 29, 2019).