Having a retirement plan helps you or your love one to have a better financial status after retirement. A person will want a retirement plan if that person has direct control over his finance and assets that will help handle their retirement (for example entrepreneurs).
When we talk about retirement what is the picture that comes in mind? According to the Cambridge dictionary, retirement is a state in some one’s life after he has stopped working which could be due to ill health or an age reached which the law of his country states he can no longer exercise his profession. Retirement in a person’s life could be seen as a gateway for the individual to spend more time with friends and family, go to different places on the globe, practicing hobbies and many other activities the person could only dream of while he was still working.
Retirement planning can therefore be seen as choosing a way of living during the active or working stage of life and coming up with a strategy to develop income in order to have a good life once retired.
Assessing the retirement situation
How is retirement planning viewed today?
As medical and technological advancement are achieved with time, life expectancy turns to increase, which implies in planning a retirement it is not enough stacking huge amounts of money, and then when retired, spend the money judiciously. The whole aspect of retirement planning is anticipating your future, and then coming up with a plan to attain it. A set of elements can be considered when planning for retirement which is: What is the period of time you intend working before going on retirement? How much money is needed to cover the expenses you have in mind after being retired? Is your actual job able to generate the income you will need to meet up with your expenses after retirement? In your plans after being retired have you included health care and long-term care services? Would you have enough to be at the place you chose to live after retirement? Have you consulted a financial advisor to tell you how much can be enough for the retirement you want?
Flexibility of the retirement period
The situation faced by certain individuals pushes them to work above their retirement age which is averagely 65, others decide to continue working due to personal preferences. A person can retire before or after the retirement due to certain factors that impact the retirement timeline, these factors are: Health status, your lifestyle habits, current health in addition to your family’s medical history are the indicators of longevity. Financial stability, knowing your actual financial input and output let’s say monthly, by simple subtraction one can estimate what he will have at the start of retirement. Lifestyle plans, after retirement do the individual seek to reduce, keep or increase his current lifestyle? If the person views travelling, hobbies and entrepreneurship, then the amount of money needed is more than that of another who just go to live at the country side. In a case where your employer covers the health insurance of you and your family as long as you are working for him, decision on retiring are greatly affected.
Determining the income needed for retirement.
This will depend on long life expectancy, taxes and inflation, basic needs, cost to maintain health for example long-term care cost, dental and vision care, an increase or drop in lifestyle, the various entrance of income and social security benefits.
Protecting your assets and making a plan
Acquiring is an important part of your retirement plan that will protect the assets you accumulate. Unforeseen situations like a long-term illness, serious accident or any other event can consume huge amount of money saved. Insurance products like auto insurance, critical illness insurance, disability income insurance etc goes a long way in preparing a retirement. In addition to that an individual can engage into annuities which are a contract with an insurance company that will provide regular payments to him after a later time.
To begin a retirement plan is not a matter of age. It is important to know that the earlier you begin to save the more you would have funds to generate a good retirement plan. For those who are older and seek to start planning are advised to go into investment, look for different sources of income. Consulting a qualified financial advisor can provide you with the essential guidance for a good retirement plan. As a personal follow up, a timetable can be used as a tool to monitor growth and progression of the retirement plan for example; for accumulating funds, variations in employment status and changes in insurance plans.
Come up with a monitoring system to adapt
There is need of periodic reviews due to the fact that there is nothing that is constant in the like change in market, change in circumstances. It is therefore critical to review your plan at least each year and see if you are on track. It is good to bear in mind to work longer if retirement funds are insufficient. Certain events such as divorce, death of spouse and loss of job will affect the retirement plan of a person thus, there is need to readjust.
Another window of opportunity might present itself on an early retirement which was not well planned like starting of a new career, volunteering, returning to school to get another training to pursue another path.
It does not matter the way you look at your retirement, what is of concern is having the right plan to live it. Some people do it on their own while others consult experts in the domain; one is never too young to start saving or old to make a plan and then adjust when there is a change in situation.