Financial Planning for a "Future You"
It can be hard to think about retirement, but you can make it easier on yourself by starting to plan for it early, getting advice, and deciding on a plan that you can put into action decades before you retire.
“Retirement is like a long vacation in Las Vegas. The goal is to enjoy it to
the fullest, but not so fully that you run out of money.“—Jonathan Clements
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There are a few steps you can take to get a rough idea of how much money you'll need for retirement. Determine how much you need to save to reach your goal by calculating the amount of income you'll need in retirement, estimating extra income sources, such as Social Security, and applying the 4% rule.
LEARN MORE: 4 Retirement Tools You Should Be Using
Planning in advance. Setting a retirement age, deciding whether you'll work after you retire, and determining how much money you'll need when you retire are some of the most crucial choices you can make as you prepare to retire early. You will have to choose investing methods during this process, which could be made simpler if you work with a reputable financial advisor.
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The response to this question is influenced by a number of variables, such as the length of your life, your health care costs, inflation, the amount you withdraw and spend, your rate of return, and the order of your returns.
Leaving these aspects aside, the 4% rule is a common way to estimate how long your retirement will last.
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The 25x rule offers a lump-sum payout that enables you to make consistent withdrawals every year over a 30-year period. It works because it enables you to estimate your retirement needs with a built-in cushion without requiring you to account for a sizable number of unknowns. 2 The $1,000 per month rule and the 25x rule are two retirement guidelines.
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When you pay taxes is the primary distinction between standard and Roth IRAs. While Roth IRA contributions are made using after-tax money, traditional IRA contributions may be taxed when they are made. However, you will pay income taxes when you withdraw the money after retirement.
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Typically, you’ll need upwards of 80% of your pre-retirement salary during your golden years. But exactly how much you’ll need may depend on:
Location: -when and where you’ll retire
Your Health and whether you’ll keep receiving employer-sponsored health insurance: -401k, Roth IRA's for example.
Whether you’re a two-income household: and if you’ll keep working part-time