Retirement can be an exciting time to look forward to, a point in your life when you can finally relax and enjoy the fruits of your labor over your years in the workforce. But to ensure that you have a comfortable retirement, it's important to prepare your finances well in advance. Here are five steps you can take to help you feel secure in your retirement savings.

Evaluate your current financial situation

Take a close look at your current financial situation. This includes an accounting of your assets, liabilities, and expenses. Start by creating a list of all your assets, such as your savings, investments, and retirement accounts. Next, make a list of all your liabilities, such as mortgages, car loans, and credit card debt. Finally, create a list of all your monthly expenses such as rent or mortgage payments, utilities, food, and entertainment.

Once you have a clear picture of your financial situation, you can start identifying areas where you can cut back on expenses or increase your income. For example, you may decide to downsize your home, sell a car, or take on a part-time job.

Determine your retirement income needs

The next step is to determine your retirement income needs. This includes estimating your monthly expenses during retirement, as well as factoring in any expected changes in lifestyle or health care costs. You should also consider any other sources of income you may have during retirement, such as Social Security, pensions, or rental income. To reach your retirement income needs, you may need to accumulate savings and investments of 10-12 times your pre-retirement annual income.

Once you have a good idea of your retirement income needs, you can start planning how to save and invest for retirement. This may include increasing contributions to your retirement accounts, opening a new retirement account, or investing in stocks, bonds, or mutual funds.

Maximize your retirement savings

To maximize your retirement savings, you should consider contributing as much as possible to your employer-sponsored retirement plan, such as a 401(k) or 403(b), or opening an individual retirement account (IRA). Take advantage of any employer matching contributions and consider increasing your contribution rate as your income increases.

You may also want to consider investing in a Roth IRA, which allows you to make after-tax contributions and withdraw the funds tax-free during retirement. This can be a great way to diversify your retirement savings and potentially reduce your tax liability during retirement.

Pay off debt

An important aspect of preparing for retirement is to pay off debt. This includes credit card debt, car loans, and mortgages. Paying off debt can free up money for retirement savings and reduce your monthly expenses during retirement.

Start by prioritizing high-interest debt – such as credit card debt – and consider using a debt payoff strategy. If you have a mortgage, consider paying it off early by making extra payments or refinancing to a shorter term.

Create a retirement budget

The final step to prepare for retirement is to create a retirement budget. This includes estimating your monthly expenses during retirement and factoring in any expected changes in lifestyle or health care costs. You should also consider any other sources of income you may have during retirement, such as Social Security, pensions, or rental income.

Once you have a retirement budget, you can start making adjustments to your current spending habits and saving strategies. You may need to downsize your home, reduce your entertainment expenses, or increase your income through part-time work.

 

Preparing your finances for retirement can seem daunting, but by following these steps, you can create a solid plan to ensure that you enjoy your golden years comfortably. And if you’d like assistance preparing for retirement, our Wealth Management Team is here! We’ll work with you to develop a personalized plan for your retirement needs, so you can focus on the things that matter most to you.

Investment products are not a deposit, not FDIC insured, not insured by any federal government agency, carry no bank guarantee, and may go down in value.