Retirement is something that everyone should be thinking about from the moment they start working. However, the reality is that the excitement of earning money and the distance to retirement allow people to forget the importance of retirement planning.
However, the earlier you start the easier it is to save for the future and ensure your financial freedom. You should note that compound interest can play a powerful part in increasing your retirement pot, the earlier you start the more compound interest you will receive.
Create a retirement savings plan can seem very confusing. That is why you should get some professional financial planning help. They will guide you through the process in reverse. You need to start with how much money would you like in retirement?
Your financial planner will work this back to illustrate what you need to invest in and where to achieve your goal.
It is important to note that everyone has different goals. There is no right or wrong amount to aim for, it is simply what you think will ensure you are comfortable and financially free during retirement.
Having decided the contributions you need to make to your retirement fund you should set up a direct payment. Ideally, this should leave the bank the moment your monthly pay arrives. The result will be you never notice the money and can’t spend it because you effectively forget it exists.
At the same time, you will be effortlessly saving for your desired retirement.
Create An Emergency Fund
Life is unpredictable. One moment you can be floating along, paying your bills with a well-paid job. The next, you can suddenly lose your job and be struggling to keep a roof over your head.
This is when people dip into retirement savings and damage their future financial freedom. You can avoid this by building an emergency fund. You should aim for 6 months worth of money. That’s enough money to pay all your bills and live for six whole months. You will need to save it gradually. But, the result is a cushion against unexpected expenditure and job losses. It gives you the opportunity to get back on your feet without touching your retirement fund.
Your financial planner will help with the investment side of your portfolio. When you are young you can afford to take more risks, meaning that a high-risk portfolio is a good idea. But, if you are closer to retirement, it is better to keep your funds in a low-risk portfolio. Within ten years of retirement is not a good time to lose it all!
Finally, you should also consider your estate early on. If the worst should happen you will want to know that your loved ones can benefit from the funds and have the retirement you were hoping for.
Estate planning can also help to minimize any tax bills you face during retirement. That’s important as it can fundamentally change the amount of money available to you each month.