What Is Retirement Planning?
Retirement planning involves determining retirement income goals and what's needed to achieve those goals. Retirement planning includes identifying income sources, sizing up expenses, implementing a savings program, and managing assets and risk. Future cash flows are estimated to gauge whether the retirement income goal is possible.
You can start at any time, but it works best if you factor it into your financial planning as early as possible. That’s the best way to ensure a safe, secure—and fun—retirement. The fun part is why it makes sense to pay attention to the serious and perhaps boring part: planning how you’ll get there.
In the simplest sense, retirement planning is what one does to be prepared for life after paid work ends. This isn't just financially but in all aspects of life.
The non-financial aspects include lifestyle choices such as how to spend time in retirement, where to live, and when to quit working altogether, among other things. A holistic approach to retirement planning considers all these areas.
What are the stages?
Early in a person’s working life, retirement planning is about setting aside enough money for retirement. During the middle of your career, it might also include setting specific income or asset targets and taking steps to achieve them. Once you reach retirement age, you go from accumulating assets to what planners call the distribution phase. You’re no longer paying into your retirement account(s). Instead, your decades of savings begin paying you out.
How much do I need?
Remember that retirement planning starts long before you retire. The general rule is the sooner you start, the better. Your magic number, which is the amount you need to retire comfortably, is highly personalized. But there are numerous rules of thumb that can give you an idea of how much to save.
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