3 keys to successful retirement planning

3 retirement planning essentials

For most, retirement is the light at the end of the tunnel; but if you don’t plan it right, that light could disappear. Solid retirement planning requires you to implement a plan that leaves you with enough retirement income to last you the rest of your years. Unfortunately, it’s easy to underestimate the amount of monthly income you’ll need. A few essentials can keep you on track. 

Determine your needs

According to the Department of Labor, you need to replace an estimated 70 to 90 percent of pre-retirement income for each year of retirement. The easiest way to do that is to make a target goal and meet it. When retirement planning, estimate your target goal based on your current income and how long you expect to live after retirement. Then factor in extra variables such as medical costs, vacation expenses and fixed costs like owning a home. 

Review your retirement planning

Once you have a target goal in mind and your retirement plans are in place, you should review the plan regularly to see your progress. Assess how you’re doing. Once things look good, start factoring in Social Security benefits, future salary increases and the rate of return you’re getting. Inflation and other assets that you have should be factored into your retirement plan as well.  

Create a plan

It’s good to have an official plan set in place that you can follow to hit your retirement goals. Eliminate any debts that you currently have and start contributing as much as you can to your retirement accounts. Consider working past your retirement age to contribute more to your retirement and reap the benefits that Social Security offers for those that retire later.

Retirement planning with stocks at age 50

You may be feeling a little shaky about investing in stocks if you’re age 50 or older, but don’t let the rocky market completely scare you away from retirement planning. While many lost a large chunk of their money due to the falling market, research has shown that the market generally trends upward over long periods. If you’re age 50, there are still 15 years until retirement, meaning that you can take on some risk as long as you’re careful.

Balance your stocks

As a general rule, subtract 100 from your age to get the percentage of stocks you should have in your portfolio. So if you’re 50, then you should have 50 percent of your portfolio in stocks. However, if you have little risk and a high life-expectancy, many experts agree that the percentage should be more around 65 or 75. After you turn 60, pull the percentage down to 50. If you don’t feel comfortable with that much risk, abide by the rule of thumb for investing in stocks when retirement planning.   

Put retirement planning on autopilot?

Target-date funds take the decision making out of investment by automatically adjusting the amount of stocks, bonds and cash in the fund as you age. While they can provide an easy way to manage your retirement fund, it may be more beneficial to rebalance your portfolio on an as needed basis. You may get better returns through a proactive approach of checking your investments at least once a year.  

Can you afford the risk?

If your savings is high enough, and you only need to spend a small amount to supplement your pension, then you can afford to invest aggressively. If you have a smaller savings and have to take out a large amount per year, then you should be more invested in fixed income.

Pay off early with a mortgage calculator

A 30 year fixed rate mortgage may keep monthly payments significantly lower than a 15 year, but the interest can pile up quickly. At the end of a 30 year mortgage, the interest payments can end up being more than the original loan principal. By making extra payments, a homeowner can shorten the term and save a good deal of money. A mortgage calculator can help compute how much extra a homeowner needs to pay to save big.

How to use the mortgage calculator

Find a calculator to fit your needs. Bankrate.com offers a calculator that has an “extra payments” feature. Input the mortgage amount, the term and the interest rate of the current mortgage. Then hit “calculate” to see your monthly payments. Underneath “extra payments,” enter either a monthly, yearly or one-time payment. Click on “show/recalculate amortization table”, and check the amortization table to figure out how much can be saved. Play around with the payments to find the best extra payment for the budget.

Refinance instead

Those looking to save more can also find out how much refinancing can save them with a refinancing mortgage calculator. The calculator compares the current mortgage to the new one. It also takes other fees into account and computes a new monthly payment, monthly savings and the difference in interest. It then provides the total cost and the months required to recoup it.

3 Keys to Successful Retirement Planning

If you thought that buying a home was hard, retirement planning can be just as difficult. The toughest fiscal challenge most people face, planning for the non-working years takes time and money. Those who do it well will spend their golden years living financially stress-free. Here's how to become a retirement planning ninja.

Create a target goal

How much will you need? That's the million-dollar question, literally. Since the Department of Labor estimates that you'll need to replace 70 percent to 90 percent of your pre-retirement income for each year of retirement, you can estimate your target goal based on your current income and life expectancy. Of course, this is just a rough estimate. Factors like whether or not you'll own a home at retirement, vacationing habits and medical expenses will significantly impact how much you'll need to save.

Assess your progress

With a target goal in mind, you can assess how well you're doing. Here's where it gets tricky. On top of examining how much you've already stashed away in a 401(k), 403(b), 457 plan or IRA account, accurate retirement planning requires you to factor in such variables as Social Security benefits, the inflation rate, upcoming salary raises, the rate of return on your current retirement investments and the value of other assets such as pensions and life insurance. You may not know all the answers offhand, so you'll have to employ some guesstimates.

To simplify the math, Bankrate's retirement planning calculator can provide a projection of how much you'll have based on your current savings rate, as well as some suggestions

20-somethings! Have You Thought About Retirement Planning Yet?

Of course when you are in the midst of your 20s, who really thinks about retirement planning? Think back to the good times of working all day and staying out all night just to repeat the cycle. Then you begin approaching your 30s and realize your long term goals which include retiring comfortable in your 50s. Executing investing strategies at a young age allows you to put aside a low amount of money per year while growing your savings for the long term.

Begin saving today

Planning for retirement is not like planning for a big party; it takes long term goal setting which can be accomplished by taking the time to write your goals and research different investment options. Do you qualify for a 401k at your job? Do you know what a Roth IRA is? You may think it is hard to start saving but in reality, putting away even $50.00 per month in your 20s will help get you on your way to saving for retirement. Calculate retirement savings to find out how much you will have saved in 25 years.

Where does the money go

Enjoying life in your 20s can be accomplished but on a budget versus spending every cent which you worked hard for. Simple tasks like getting into the habit of saving $25.00 each pay check to send to a savings account or even savings accounts which automatically pull money starts the retirement planning process without too much hassle.

How much should you save

Retirement planning in your 20s can be the last thing you want to think about. Depending on your job and living situation, your contribution to your retirement savings account can vary. Some employers will match your contribution and if your living expenses are minimal, consider contributing the maximum allowed. If you are unsure of where or how to invest, consider contacting an investment adviser to help you with your retirement planning.

Retirement planning check list:

• Send at least $25.00 each paycheck toward savings
• Write down your long term retirement goals
• Contact an investment adviser
• Contribute to employer contribution retirement account