Posted on: 22/02/2022 by: Kyle Phillips in: Pension, SMEs, Startups, Self-employment
Today I am going to be discussing the importance of having a retirement plan in place. There are many questions that surround retirement plans such as; “Will I end up running out of money? Will I even be able to retire when I would like to? Is there any way to be sure of having the retirement I want?” Well…Today I am going to try and answer a few of those questions for you!
What is a retirement plan?
To start off, what is retirement planning? Well, retirement planning means that you are setting yourself up with a steady income or money after you have retired. It works by setting aside funds with that goal in mind. There are many strategies that can be used and these will differ from person to person depending on your income, age, and final retirement goal.
Why do I need to plan my retirement?
The subtle art of growing old can be rather expensive. Certain expenses may inflate and deflate but luckily for people in the UK medical bills aren't a problem due to the NHS, whereas if you were living somewhere where health care wasn’t free you would have to factor in for the possibility of medical bills rising.
Furthermore, inflation is a factor you need to count for as you don’t want to be caught out when retired not being able to afford to pay for your expenses. Basically, having a retirement plan will ensure financial stability for yourself without having to depend on anyone else to help out. It can definitely make your later years a lot more streamlined and stress-free!
Reasons to have a retirement plan
There are many reasons to have a retirement plan in place and include rising costs, which may make you compromise on your standard of living to keep up with them. Having financial independence in your older years and being responsible for yourself will give you the most amount of freedom and you won’t have to rely on your younger off-spring (if applicable) for support.
Having a backup of funds and being financially stable is essential for medical emergencies, whether it be you needing to go in for a private procedure or your beloved pet does as health-care for animals can be pricey. The lack of a social retirement benefit as although pensions and other funds exist, they can end up not being sufficient enough to cover all crucial expenses which is why creating a retirement plan with a fixed income and mutual fund investments becomes crucial.
How do I plan my retirement?
The first step you need to complete is simply picturing your retirement. Think about your dreams and goals for gracefully growing old and then estimate how much money you would need to sustain it, of course you also need to count for inflation when budgeting your retirement. The next step then would be to estimate how much of your vision can be covered with use of your assets as then you can see more clearly how much you will need to plan for to arrange your future. Moving on from that step you will want to look into your present financial situation to gauge exactly how much you can save per week or month. In an ideal world you’d want to be saving thirty to forty percent of your savings to invest into your retirement plan. After you get these steps in place you can then potentially narrow down on investment avenues.
The younger you start the more time you have to take advantage of compounding as well as taking a few risks with it. It is said to try and invest aggressively in mutual funds and also company stocks if affordable to you. Then as you grow older diversifying your investments can be a good move and getting involved in government-backed securities. Continuing, think about including insurance policies and annuities within your retirement plan. A good retirement plan can be segregated into, accumulation, investment, and withdrawal phases. Most say that until your early 50s you should try to focus on investments and building up your corpus. Then when the time comes for you to start to think about retiring, start to feed the money into safer avenues so it is easier to dip into once you have retired.
When should I start planning for my retirement?
As soon as possible, the sooner the better. Being in my early twenties I can safely say I am not thinking of retiring anytime soon, but I know myself that starting early does give one more leeway and less stress in the future. If you are looking to start planning your retirement, following guides on the web can help, asking for help from an expert in that field, or if your work-place has a retirement fund scheme then discuss how this works with them and how it could help you plan your retirement easier. There are many reasons to plan your retirement and peace of mind is definitely one of them.
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