By Mathew Jade, Contributor Fea Money Financial Literacy School. Photo Credit, Unsplash
Many people are stressed over how much money they’ll have left when they finally retire. Even though you may have a decent income currently, you probably won’t have enough saved up by the time you retire to make sure you can live through your retirement in ease.
Here are some questions that you should ask yourself before planning for retirement, or while determining whether your current plan will be enough to last your retirement years.
How Much Time Do I Have?
The main thing you need to decide is the age at which you want to retire. You need to know the amount of money and the time you will have to spend that money once you’re retired.
Although no one knows exactly what age they’ll live up to, you should plan to live to at least 80 years; this will give you a rough idea of the amount of money you need to save up and you probably won’t have to be stingy in the last few years of your life.
What Amount of Money Should I Set Aside Every Month?
This is where it’s actually useful to have a solid financial plan. If you don’t already have one, please start right now. Regardless of your age, now is the best time to start saving. The more time you waste before you begin saving, the less money you’ll have once you retire.
Start by calculating the amount of money you can save every month and then calculate the amount you’ll have once you retire if you keep saving at that rate.
For example, if you have 20 years until your retirement and you maintain the same savings rate from the start of your career, you may find that this amount won’t be enough to get you through your retirement years. Because of this, it is often recommended that you should save more every month as your income increases.
What Amount of Risk Am I Willing to Take?
This is one of the most important questions when you’re choosing a retirement plan. Some retirement plans may invest in other markets, so you’re at a considerable risk when you put your money in such plans.
Other plans like annuities and all-inclusive insurance plans are not really exposed to any market risks so you stand to gain a lot from those without really risking anything.
What If I Require Access to the Money Early?
When you choose a retirement plan, it’s necessary to consider that emergencies may occur. If you get ill or injured, you may have hospital expenses in addition to lost income.
Either way, there are times when you suddenly need some money. Retirement plans usually have a lot of penalties if you want to draw money out before you actually retire, so make sure you don’t get one that doesn’t allow you to draw money whenever you want.
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