What you need to Effectively Plan for Retirement

  Most of us wait until we’re well into our forties and fifties before we can start putting a strategic retirement plan in place. But do you know that the earlier you can plan for retirement the better your retirement income will be? Plus, there are savings and investment perks that are only available for the younger age-groups.

Key Steps towards Financial Security in Retirement

You can approach saving for retirement from different angles. Whichever approach you choose, there will be key factors to consider in all. Some of them are:

Have a clear outline of your retirement expenses
Identify what your expenses post retirement will be. These will be based on the lifestyle you’re accustomed to or the one you will adopt after retirement.

It should take into consideration all basic monthly needs, additional expenses occasioned by anticipated emergencies, etc.

Now you have an idea of how much you need to put away to finance that lifestyle, bearing in mind that you’ll no longer have the safety net of a regular job income.

Join a Retirement Savings Plan
Most employers offer a 401(k) plan. Join and contribute as much as you can comfortably afford without putting a strain on your lifestyle. Give the maximum required for the employer to match your amount so your total contributions are higher.

Join an IRA

If your employer does not have a retirement savings plan in place or you’re in business, open an Independent Retirement Account and dedicate a set amount of savings to the account. Like the 401(k), an IRA also offers tax benefits.

Resist the temptation to withdraw your savings
Sometimes life gets tough to the extent that we would consider taking out all the savings we’ve put away to pay for the challenge at hand. If you withdraw your retirement savings, you lose the principal as well as the interest. You may also attract penalties or lose your tax benefits.

If you move to a different job, you can opt to leave the funds in the existing plan, transfer them to the retirement savings plan at your new job or move them to an IRA. The mistake many people make is withdrawal what they had saved, in the belief that the money couldn’t be rolled over anyway.

Diversify your investments

In addition to the retirement savings plan, invest in different but safe portfolios that are guaranteed to give you good returns in 10, 15, or 20 years.

Going it Alone versus Hiring a Financial Advisor

If you are finance savvy, you may feel confident enough making financial decisions that are aimed at strengthening your retirement financial goals. However, not everyone is this confident.

If you second-guess yourself about every investment choice you think of making and rely on the opinions of others to push through with it, you probably need a financial planner to help you.

How to Choose a Retirement Financial Planner

The most important thing is to find a financial planner with the credentials to back their claims of expertise. Look for a financial planner with a Certified Financial Planner (CFP) qualification. Personal Financial Specialists (PFS) and Chartered Financial Analysts (CFA) are other professionals you can turn to for assistance.

Check if they are listed by the FPA

It can be a bit of a challenge to verify that the planner is good at what they do. While you may have to go with your gut on how knowledgeable you perceive them to be and what others who’ve used their services say about them, you should at least verify that they are indeed real professionals. Use the Financial Planning Association records to see if they are listed.

Consider their experience

It’s not enough for them to have practiced for years. They should have experience handling your type of situation. If they identify your case as a unique situation, they may not dispense the best advice on how to get the best results.

It’s near-impossible to have two clients with the exact financial planning requirements, but they should have handled cases with some similarities to yours.

Consider their charges

Different financial planners use different approaches to determine their fee. Some charge a fee-only rate, which can be based on an hourly rate, annual retainer,  a flat rate or a percentage of your assets. Based on the percentage option, if you’re seeking advice on how to manage a $10 million estate, you wouldn’t pay the same amount as someone receiving advice on how to manage $200,000.

Some financial planners also charge commission-based fees determined by the investment products they promote/sell. The biggest drawback in choosing a planner who relies on commission is that they may be biased in their advice, and encourage you to pick the products they’re selling. In reality, these may not be the best options for you.

But again they may also choose that angle because they’re good at analyzing/managing the investment products in questions, and can show you how to leverage the opportunity for maximize returns. You’ll need to consider what you have to gain when making the decision.

Are they curious to know more about your situation?

A good financial planner will ask the right questions to try and understand where you are with your finances and the objectives you are hoping to achieve.

Check their claims against the experience of real clients

Anyone can promise the impossible when they know they can make some money off you. Ask the financial planner for references of people who have used their services and reach out to these people for an honest review of the service they got. If possible, find clients whose financial needs were as similar to yours as possible.

Go through customer testimonials on their website and reviews left on their social media pages. You can tell a lot by what majority of the clients say. You can also reach out to anyone whose review stands out for clarification or to get additional information.

Bottom line

Planning for retirement ensures that when the time comes, you can sustain your lifestyle or enjoy a better one, and support causes that are close to your heart without feeling any financial strain.