Preparing for retirement means that you get to plan your dream retirement and then decide how to fund it. Planning and dreaming can be a lot of fun, but for many figuring out to fund your retirement or researching some of the less flashy details can be difficult. Unfortunately, you cannot have one without the other. That being said, preparing for your retirement can be a lot easier than you think.
Expect the Unexpected
When you are preparing for retirement, you need to think about the unexpected which is where life insurance comes in. Life insurance can prevent bad situations from getting worse by guaranteeing that you, your spouse, and your family are all taken care of in the case of your or their death. Insurance can be a little complicated so it is recommended that you ask as many questions as possible when researching dividend options and monthly payments. Life Insurance is something that you would rather you and your spouse have now than regret not having it later.
Fund Your Retirement Accounts
Putting away money for retirement is integral to having the retirement you dream of. Statistically, it will pay off in the long run if you start investing in your retirement fund as early as possible. There are a couple of different types of retirement accounts like 401ks and IRAs that you can fund and preferably you will have multiple accounts by the time you retire.
Your 401k is usually through your employer and is a pre-tax account. This means that money is taken from your paycheck before taxes are taken out. This means you are actually saving money because you are reducing your taxable income but you will have to pay taxes when you withdraw that money later on. A lot of companies also offer you a company match, meaning that they will contribute the same amount as you into your fund up to a certain amount. So if your company has a match up to 3% and you have the money to invest, then you are essentially getting free money when you invest 3%. Make sure you are educated on how your money will be invested once you fund your 401k. Once you fund a retirement account, even if it is not a 401k, that money is used to buy stocks and bonds in your name.
Another type of retirement fund is an IRA. An IRA or Individual Retirement Account is a post-tax retirement account. That means you will not have to pay taxes when you withdraw that money later on in life when you decide to retire. Because these funds are specifically for retirement, then there will be penalties if you withdraw anything before the age of 59 1/2. The goal for anyone is to max out your contribution to your retirement funds. Professionals say that you should set aside at least 15% of your income towards retirement per year.
Educate Yourself About Social Security
Social security is money that is deducted from your paycheck your entire working life. Then when you retire, you can apply and receive social security benefits from the funds that every working person in the United States pays into. Social security has rules and regulations so you will want to know as much as possible to make the best decision on when to start requesting social security benefits. Getting social security does not specifically mean that you do not work. You can actually work while receiving social security but you are limited on how much. You can start receiving social security at 62 and you typically start receiving the largest amount of social security at 70. There are free resources you can utilize through the government to make sure you are making the best choices for yourself.
While for some, retirement may seem far away and for others, it is right around the corner, it is never too early to start contemplating retirement. There are many aspects to retirement that you will need to consider. Utilize all the resources and planners you can to make sure you are prepared.
Your 401k is usually through your employer and is a pre-tax account. This means that money is taken from your paycheck before taxes are taken out. This means you are actually saving money because you are reducing your taxable income but you will have to pay taxes when you withdraw that money later on. A lot of companies also offer you a company match, meaning that they will contribute the same amount as you into your fund up to a certain amount. So if your company has a match up to 3% and you have the money to invest, then you are essentially getting free money when you invest 3%. Make sure you are educated on how your money will be invested once you fund your 401k. Once you fund a retirement account, even if it is not a 401k, that money is used to buy stocks and bonds in your name.
