In a perfect world, every American would start a retirement plan after their first job, but it’s not that simple. Some Americans wait until their 40s or 50s to start a retirement plan service. Although the road to retirement can seem daunting for some, there are strategies that late-bloomers can use when retirement looms. Here are three important tips for retirement planning for late starters:
1.Calculate the total needed for retirement
A typical way to find out how much is needed for retirement is to consider 80 to 85 percent of a workers’ pre-retirement income, reported The Motley Fool. If workers earn $50,000 annually, they will need $40,000 to $42,500 savings per year once they reach retired.
It is also important to calculate how much is currently being saved. The 80 to 85 percent adjustment is for workers who spend nearly their entire paycheck or don’t invest into savings. If a worker saves almost 60 percent of their earnings, 85 percent savings might be too high of a total calculated need.
2.Use a retirement planning calculator
Adding up numbers by pen and paper might seem more proficient, but sometimes the results can be bleak and uninspiring. According to The Motley Fool, it is wise to first multiply the number of yearly investments one needs by 25. From 1990 to 2010, the S&P 500 maintained a long-term annual average of 9.1 percent per year. If this is used, one could determine that a 9 percent yearly return for investments will happen after taxes.
Using this information with any other investments like bonds, could create a long-term annualized return rate. Resulting in workers receiving a better idea of their total savings numbers when plugged into a retirement planning calculator.
3.Get rid of all consumer debts
When workers start planning for retirement at an older age, there’s a chance they could have several credit cards with debt on them. According to Financial Mentor, eliminate wasteful and expensive credit card debts and pay off the balances with the highest interests first so the freed up money can get rid of other credit card debts. However, it’s wise not to spend a surplus of the amount a worker earns in a month, so it doesn’t pressure credit card debits to continue or increase.
Following simple retirement plan steps can help any worker get to the amount they want for a healthy and worry-free retirement. Employees unsure of retirement planning services should contact their human resources department for additional help.
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