Whether you imagine retirement being five or 50 years away, there are things you can do today to start preparing for it financially. The tips below can help you get ready to make this a rewarding and comfortable stage of life.
What does retirement mean to you? The answers to this can vary widely. Some people plan to retire at 40 while others hope to work for as long as they possibly can. Most people fall somewhere in the middle of these extremes, but retirement can still mean many different things to different people. You may spend it raising your grandchildren, traveling, going back to school or becoming deeply involved in your community. Think about what you'd like to do and when, and review this decision periodically as you get older since you may find that your values and plans change.
To have a successful investment journey, you should also periodically review how much money you expect to have when you retire. This may be a combination of your own savings plus Social Security and pension benefits. Be aware that this can be complicated if you are divorced or widowed. For example, if you were married for a certain amount of time and your ex-spouse made substantially more than you, you might be able to draw based on their Social Security earnings. Your divorce agreement may also allow for you to get a portion of an ex-spouse's pension. Knowing this information can help guide you in your plans for after retirement and can also help you determine whether you need to up your contributions.
Another important consideration is protecting your assets, particularly if you want to be able to leave something to your children. For example, you might want to look into Medicaid spend down laws if these would apply to you and what you can do now to best position yourself financially if you do need to access Medicaid. You may also want to review a guide on filial responsibility laws. In certain filial responsibility states, your children could be held responsible for your care if you become impoverished because of medical costs or for any other reason. Talking to experts, such as an attorney and a financial professional, may help you better understand your options based on your personal situation.
There are various formulas for figuring out how much money you'll need when you retire based on your present spending, but these are guidelines only. Someone who is going to move to a country with a much lower cost of living where they plan to enjoy a simple lifestyle is going to have far fewer needs, whatever their present expenditures, than someone who is going to spend a lot of time going on cruises or simply maintaining their present lifestyle. You may also have plans to run a small side business or continue earning some money in another way even after you officially leave your job. Doing the math and having some numbers to aim for can help you make sure that you are contributing sufficient amounts to your various investments.