Planning for Retirement
1. When Should You Start Planning for Retirement
The short answer is as soon as possible to use the amazing power of beginning early. If you didn’t start saving for retirement as soon as you started working, start now to use the power of compounding. Think of it this way, starting early gives you more flexibility later on in life.
Making the most of the early years of your career is one way to hit your retirement savings goal. It is also probably the easiest, but it’s not the only way. If you have less time, you’ll simply need to save more each year.
For example, if you started saving $4,500 each year starting at the age of 20, you’re on track to have $1 million at the age of 65. If you start when you’re 30, you’ll have to save about $9,000 each year to reach that same goal. If you are boarding the train at 40, you’ll need to save about $18,000 a year. At the age of 50, things get really complicated as you need to put aside $40,000 a year to have a shot at attaining that goal.
2. Retirement Planning Tips and Mistakes
Chances are you already made some retirement mistakes along the way. But, learning about them will help you be more realistic about your future and think ahead.
Not accounting for inflation
Inflation can eat away at the buying power of your retirement fund. When planning for retirement, just assume prices will go up to be safe.
Neglecting your health
The paradox of modern society is that we take our health for granted to earn a good income and then end up spending a fortune attempting to restore our health. Heath care costs are high and often neglected by retirees. Staying healthy is key to being financially fit in retirement.
Underestimating the importance of a good credit score
Although you can retire with a low credit score, the question about how credit scores might affect retirement is a complex one. The decision to retire has no impact on your credit score, and neither does your age or a change in your income. However, credit scores do matter even in retirement and the same rule applies: the better the credit score, the more benefits and advantages it can bring. However, a low credit score could lead to high-interest rates, expensive insurance premiums, disqualifications from better credit cards, and even a delay in your ability to build wealth.
Thinking it’s too late to improve your credit score
it’s never too late to improve your credit score and financial prospects. Even though you can retire with a low credit score, you can and you should work at improving your credit throughout retirement. For example, retirees should keep their credit card accounts open rather than closing them as keeping them active extends one’s credit history and the longer it is, the better. If you want to consolidate your credit cards in retirement, try to keep the accounts with the longest credit history that benefits your credit score. As you develop a longer payment history with good payment habits, your credit score will continue to improve. It’s actually simple, all you have to do to maintain a good credit score is make your payments such as rent, ComEd utilities and other bills on time.
Quitting too soon
One of the best ways to ensure you have sufficient money in retirement is to work a few additional years beyond what you originally had planned to add more cushion to your nest egg. Even just a couple more years of work income can significantly expand your retirement fund.
Takeaway – Even the goal of attaining a million dollars is possible thanks to the power of time which is the secret of compounding. If you give your savings enough time to grow, you’ll only need relatively small investments of money that are made consistently to end up with a pretty big balance. No matter where you are on your life journey, just try to save more starting this very minute and make sure that your credit score works for you – your future self will thank you.