How to Prepare a Retirement Plan

The need for a retirement plan is common knowledge, but less than half of American workers know how much they need to have to retire comfortably. More than 60 percent are planning to rely primarily on Social Security for their retirement income needs. The truth is that it is never too early to begin building a nest egg by learning how to prepare a retirement plan that will adequately cover your expenses throughout the later years of your life. The steps for retirement planning may take some time and effort, but the rewards are far-reaching when you can spend your retirement years in comfort and security.


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    Know your retirement needs. Most financial experts recommend saving 10 to 15 percent of your income for retirement, beginning when you are in your 20s. If you didn't begin to plan for your retirement that early, there are also many good retirement calculators available to help you determine what your specific saving needs might be. The final figure will probably be around 70 to 90 percent of your pre-retirement income, if you want to enjoy a similar standard of living throughout your life.
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    Get out of debt. Pay off your credit cards and other consumer debt like car loans. Develop a plan for paying off your mortgage early. Pay cash for items whenever possible. If you can retire debt-free, you will need that much less to live on.
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    Create a savings plan. Whether you put your money into a 401k, IRA or company pension plan, budget an amount each month that will go directly into your retirement investment. This amount should be based on your previous calculations that determine exactly how much you will need to live on after retirement. Taking the money out of your paycheck before it even reaches your checking account helps prevent the temptation to spend your retirement money on anything else.
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    Contribute the full amount to your employer's matching program. If your company matches funds you put into your retirement account, that is considered free money to be used after retirement. In addition, you will receive tax benefits on your own contributions into the retirement investment. A smart component of retirement planning is to take full advantage of this benefit. This will maximize your own retirement investment dollars right away.
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    Learn basic investment principles that can help you make the most of your retirement money, including creating a regular saving program, calculating your net worth and diversifying your investment portfolio to reduce your risk and increase your potential return. A big part of learning how to prepare a retirement plan is studying the various investment vehicles at your disposal to find the best ones for your budget and goals. These principles are best learned through an investment adviser who specializes in retirement planning, but you can find plenty of good information through the Internet as well.


  • Learning how to prepare a retirement plan can be tricky business. If you are unsure of the tax implications of retirement accounts, or need more information about retirement investments, seek the assistance of a professional tax accountant or financial planner.

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Categories: Retirement