You likely want to enjoy a secure, fun, and safe retirement. To make this goal a reality, you must have a retirement plan. Retirement planning begins with setting goals and knowing exactly how long you have to meet them. Here are four key things you should know as you set up a retirement plan.
Your age and your expected retirement age are used to lay the groundwork for effective retirement planning. The more time you have until retirement, the higher level of risk your portfolio can withstand. For those who have more than 30 years until their targeted retirement age, they can safely invest in riskier investments, like stocks. Inflation also needs to be considered. Your returns must outpace it to give you the most purchasing power after retirement.
Another key factor will be your spending needs. It is common for people to think they will spend up to 70 percent less after retirement. However, if the mortgage has not been paid or medical issues arise, this is usually an unrealistic assumption. It is better to plan to spend more than less.
For retirement planning to be effective, it is important to balance risk tolerance with investment goals. You may want to work with a professional to help design a balanced portfolio. It is common for markets to cycle up and down. A professional will ensure that your investments get the maximum return possible.
A well-rounded retirement plan should also include estate planning. This would also mean that you have sufficient life insurance coverage.