It’s a new year, and for many, that means it’s the season for making resolutions and plans. Oftentimes, those “plans” are financial in nature. Some of the most important financial planning you can do is deciding when and how to retire. If retirement planning is one of your goals for 2023, this article will help you get started. What follows are 5 tips for getting your retirement plans in order in 2023.
Step 1: Actually Start Planning
It may seem obvious, but the biggest tip we have for successful retirement planning is to actually start the planning process. Specifically, you should start planning as early in your working years as you can. That strategy will allow your investments to grow for the longest possible time.
Many older workers sometimes feel that it’s “too late” to start retirement planning. That’s not the case. While it might be true that late planners will have much more ground to make up, strategic investing and dedication can help make up the ground quicker than you might realize.
Step 2: Come Up With A Number
Another rather obvious step in your retirement planning is to decide just how much you’ll need to live on in retirement. That means you’ll need to take a deep dive into your income and expenses and see what you bring in and spend now, before retirement.
Standard advice suggests that you’ll need 70-90% of your pre-retirement income to live on. If your current savings and retirement investments won’t cover that, it’s time to make some important moves.
Step 3: Build A Financial “To-Do” List
While this article is specifically about “retirement planning,” it’s probably not your only financial goal. So, it’s important to put those goals down on a prioritized list. Some of those goals may include paying off credit card debt or student loans. It usually makes sense to pay off interest-bearing debt before trying to save. However, if your company offers matching contributions to retirement plans, you should take advantage of the opportunity. Speaking of which...
Step 4: Pick A Retirement Plan That Makes The Most Sense
In many cases, successful retirement plans aren’t measured by “how much” was saved, but rather by “where” the money was invested. So, where should you invest for retirement?
Unfortunately, a definitive answer can’t be found in a simple blog article like this, but we at Tremblay Financial Services would be happy to give you a second opinion and get you on the right track. As a rule of thumb, though, the best retirement plans will come with some tax advantages and additional incentives like company-matching contributions. That’s why we suggest investing in your company’s 401(K) program, especially if they offer matching contributions. It really is like getting free money!
Another popular option is an IRA. However, just like 401(K) plans, there are several IRA options on the market. Again, we suggest getting a second opinion to help decide which plan is right for you.
Step 5: Pick The Right Mix Of Investments
So, you’ve selected the retirement account that makes the most sense for your personal situation, but that doesn’t mean there aren’t decisions that still need to be made. Most retirement plans allow for a “mix” of investments within those plans. That mix could be made up of stocks, bonds, and mutual funds. Determining which of these products should be in your portfolio generally depends on how much risk you’re willing to take and how much time you have before retiring.
As a rule, younger people tend to invest more aggressively. The idea is that they have time on their side, and they can bounce back from market volatility easier than older investors. If you’re getting closer to retirement age, it might make more sense to stay on the conservative side with your investments.
If you still have questions about what your retirement plans should look like in 2023, click the link below for a second opinion from one of our trusted advisors. It’s free!