How to start planning for retirement
“Retirement” is a word that some people shy away from. Who wants to think about being older and worrying about money? None of us do, which is why we need to think about how we are going to retire earlier, rather than later. Think of retirement as a gourmet meal with plenty of flavours and tastes that you need to try out. For example, some people use credit as a means of subsidizing some parts of life, such as online loans, while others decide not to use credit. Some want to travel, while others are happy being homebodies.
Here are three good steps to help you start preparing for retirement:
Step 1: Know the levels of cash in hand vs. assets you’ll need for retirement
It’s a dream for many people to spend retirement flush with cash. It’s one thing to have it in your pocket, but it’s probably more lucrative to keep most of your wealth stored in assets. Cash presents advantages and disadvantages: if your bank goes under or the money is stolen, you might not get all of the money back. However, cash gives you financial liquidity – you can’t easily pawn an item or sell a house at the drop of a hat. Assets tend to suit investors who want to see tangible things that they own. This is why bricks and mortar will always be a popular financial choice. Seeing your investment in real estate gives people a sense of security.
Step 2: Contribute to your retirement pension
Pensions are the bedrock of a stable retirement plan. You don’t have to get a pension but realise that it can be an excellent safety net to have in case other investments go awry. Think of your typical pension plan that comes with your employer: these are excellent ways to get started on retirement because it requires minimal attention from you and your employer will match everything that you put towards the pension. If you prefer to have more control over your pension you can also have an individual pension. This may be a good idea for disciplined individuals who are actively seeking an early retirement.
Step 3: Pinpoint the age you want to retire
For some, 50 is the magic number while 60 is also great. Whether you are going to withdraw cash from retirement plans, use cash advances, or supplement your income with a part time job is a decision you’ll struggle with later, once you settle on an age to start living your life the way you want to. Once you know your number, you can then work backward and start planning the retirement income details.
Top tip: Always talk to a financial advisor before you make any concrete retirement decisions to ensure that you get the most value for your future.
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