Money Basics
Planning for Retirement
Seven retirement planning tips
Securing enough money to cover your retirement years takes planning and discipline. As you work on your retirement plan, take the following steps.
- Estimate your future expenses. Think about any expenses that may be reduced or added. For example, you may pay off your mortgage but gain more medical expenses or add expenses for travel.
- Decide where your retirement income will come from: savings, investments, Social Security, a company pension plan, or rental income.
- Estimate your yearly retirement income. Your lifestyle will determine how much you will need. As a rule, you will need 60 percent to 80 percent of your gross household income today to maintain the same lifestyle after you retire.
- Don't forget about inflation. Inflation is the steady increase in the prices of goods and services. It can diminish your buying power, savings, and investment earnings. For example, if the interest on your investments is 4 percent and the inflation rate is 2 percent, you are essentially earning 2 percent on your investment.
- Become a knowledgeable investor. Don't invest in anything you don't understand. There are many resources that can help, including books, the Internet, and a financial advisor.
- Create an investment plan. If you are young and not afraid of risk, you might consider riskier investment strategies. As you get closer to retirement age, you might consider less risky investment options.
- Regularly review your investment portfolio to make sure you can meet your goals.
