Best Retirement Planning Path to Take
Retirement planning was often overlooked for generations. However, it’s now become a necessity for all Americans. So which path will give you the best retirement possible? Let’s dig a little deeper below.
Retirement Planning Definition
Your retirement plans will be unique to your individual circumstances. Therefore, it’s difficult to define this process in any specific way that relates to everyone. But let’s give it a try.
So what is retirement planning? In general, it’s the process of developing financial and personal goals for your retirement before implementing the necessary actions and decisions to achieve those goals.
And this is all possible through significant savings efforts and by getting the most out of your retirement benefits. For example, did you know that 42% of people between the ages of 18 and 29 have no retirement savings at all? This report comes straight from the U.S. Federal Reserve.
To make matters worse, 26% of Americans aged 30 to 44 haven’t begun saving for retirement, either. Yet with proper retirement planning, we can minimize these statistics in a major way. And in terms of retirement, the earlier you start saving, the better.
The Keys to Early Retirement Planning
Time can be your friend or your enemy as you begin saving for retirement. And the choice is completely yours.
The greatest recommendation is to begin putting money away as soon as you begin your career. Maybe you graduated from college or joined the workforce straight out of high school. Either way, you need to be vigilant in your retirement savings.
Many employers offer retirement benefits to both part-time and full-time employees. This typically includes 401(k) plans. And this is where you can begin your retirement savings in the early stages of your career.
Making retirement planning a priority will pay off in the long run. And most employers will offer a 401(k) contribution match up to a certain amount.
In fact, nearly 75% of employers will match half of your contribution, up to 6% of your pay. Take advantage of these benefits and track your 401(k) plan over time. Make any necessary adjustments, but don’t begin withdrawing money before you retire. This can lead to extensive taxes and penalties due to early withdrawal laws.
You may also want to consider setting up a Roth IRA or Roth 401(k). A Roth IRA is a special retirement account in which you pay taxes on money going into the account. Therefore, all withdrawals are tax-free in the future.
Almost all brokerage firms offer individual Roth IRAs and many Americans set up an account to complement their 401(k) plan. It’s another way of protecting your retirement planning so you can retire on your own terms.
Social Security and Medicare Planning
You can’t plan for retirement without considering Social Security and Medicare. Moreover, there are many rules and guidelines to follow. This will ensure you maximize your benefits in retirement.
Let’s start with Social Security. Traditionally, the retirement age to receive full Social Security benefits was 65. However, this all changed due to the Social Security Amendments of 1983 put in place by Congress.
These amendments completely changed the trajectory of retirement for Americans. The legislation gradually increases the retirement age for full benefits based on when you were born.
The reasoning behind this change is life expectancy. Americans are living and working longer than ever before. Anyone born before 1938 can still receive full benefits at 65 years of age. But the age gradually grows by a few months for each birth year until the age of 67 for anyone born in 1960 or later.
So to maximize your benefits, it’s best to delay your retirement until your corresponding age if possible. This will give you more financial security as a retiree.
Medicare, on the other hand, is less difficult. And anyone age 65 or older can sign up. Younger individuals with specific disabilities, conditions or diseases can also access Medicare.
You are eligible for Medicare Part A at the age of 65 if you or your spouse worked and paid Medicare taxes for at least 10 years. Medicare Part B is a separate benefit that you will have to pay for yourself. It covers specific services, such as home health and outpatient care.
All in all, the best retirement planning paths will include strategies to maximize your benefits. Social Security will complement your retirement savings, while Medicare will protect your medical needs as you get older.
Retirement Is Changing
Retirement is evolving and so should you. It’s important to remain vigilant in your savings efforts while remaining informed as well. For the latest retirement strategies and investment tips, sign up for the Wealthy Retirement e-letter below. This FREE newsletter provides valuable insights and trends to help you become financially fit for retirement.
Don’t fall behind like generations of the past. Begin your retirement planning as early as possible and stick to your plan throughout your career.