What’s the common retirement age?

According to Gallup research, 62 is the average retirement age for Americans; However, there is no real retirement age. The ideal age for you depends on many factors, from your personal preferences to your lifestyle and the nature of your work. For example, if your job is physically demanding, early retirement can make sense.

Regardless of when you plan to retire, you need to make sure that you will have adequate means of subsistence in due course. Retirement planning can help you ensure that you are financially stable even if you don’t get a steady paycheck every month. How much do you need for a safe retirement and when should you start saving?

You don’t need an expensive financial advisor to create your personal retirement plan. This article can get you started and covers everything from the amount of cash you will need to the tools you can use to prepare.

When should you start retirement planning?

It’s never too early to start save for retirement. That means it’s never too late either! If you didn’t start in your 20s, don’t let this stop you from starting later in life. Start saving as soon as possible. Why? A smart retirement plan gives your money time to grow thanks to compounding – which essentially multiplies your money. The sooner you save, the more money you can put together.

Here’s an example of how it works: Let’s say you start saving at age 35 and set aside $ 3,000 annually in a 401 (k) or similar tax-privileged retirement account. When you retire at age 65, you will have deposited $ 90,000 of your own money. However, thanks to compound interest, you have a lot more. Assuming a return on investment of 7%, $ 90,000 would have become just over $ 300,000.

How 401 (k) s work

ONE 401 (k) is a tax-privileged retirement account This allows you to save for retirement while enjoying tax benefits. Money that goes into a 401 (k) is before tax. If, on the other hand, you deposit money into a normal investment account, part of it goes into income tax. Essentially, you can save more with a 401 (k). It also means you will make more money – which will result in more money in the long run.

However, if you attempt to withdraw from your 401 (k) before you have reached the full retirement age of 59 one and a half years (from 2021), you face resignation penalties. But if you leave it there and don’t touch it until you’ve passed the 59 and a half mark, you won’t face these penalties. You only have normal income tax to pay the money when you withdraw it.

Another great benefit of a 401 (k) is that many employers match a certain percentage of what you put in, up to a certain annual limit. For example, if you make $ 80,000 a year and invest 5% of your salary ($ 4,000) in a 401 (k), a company that offers 1: 1 matching will also deposit $ 4,000 and your investment double. You can even automate posts so you don’t have to worry about the process.

How Much Do You Need to Retire?

For the average American, roughly $ 1.4 million should be enough to retire. This means that each individual’s needs are unique. The 4% rule can help you determine your retirement needs. This states that you should be able to withdraw 4% of your savings annually without ever touching the principal (the money you deposited that is different from the compound income).

To determine what your 4% will look like, you need to create a personal financial budget. Add up all of your expenses, including rent, food, gas, health care, and utilities. This will show your yearly expenses. Then multiply that amount by the number of years you want to retire. For example, if you have $ 30,000 in annual expenses and you are planning to retire for 25 years, you need to save $ 750,000. This is the minimum that should be sought.

While it can be supplemented by other funds (like social security benefits), this nest egg can bring peace of mind. Plus, you don’t want to rely on retirement planning alone. The monthly Social Security Administration (SSA) service won’t get you very far, and diversifying your retirement income is essential. This post explains your options, including a Roth IRA and a 401 (k), as well as how you can make more cash for retirement.

How about early retirement?

The average retirement age is 62 years. But what about early retirement? More and more people are striving for FIRE (Financial Independence, Retiring Early). Even if the baby boomer generation may have set the benchmark at 62, Millennials and Gen Zers plan to retire earlier than older workers. With savvy financial planning, this milestone is possible. It just takes research and dedication.

The 4% rule can also help you plan FIRE, which will help you set your goal for financial independence. This post talks more about how this goal can be achieved, including making more money (for example, through a part-time), invest in tax-privileged accounts and diversify your investment portfolio. Experienced financial instruments such as a Roth conversion manager can also help you retire early.

Those who want to retire early should also think about cost savings. Keep in mind that factors like location can affect the cost of living, and money that seems adequate in small town Utah or Vermont may not get you as far in an urban center like Washington DC growing numbers of Americans are even moving abroad for retirement and looking for lower cost of living countries like Mexico.

Your journey to wealthy retirement begins today

Even if you love your job, you probably don’t want to work forever. Most people plan to retire by a certain age to enjoy their later years and gain their time for other activities such as travel. Whatever your retirement goals, it’s important to start planning for them. Start your retirement plan Early on increases the likelihood that you will be able to gain financial freedom sooner.

To make retirement planning easier, incorporate it into one conscious spending plan. This way, you can manage your money in a way that leaves you feeling free of guilt and the freedom to live the lifestyle you want while in control of your finances. Learn more about how to manage your money while living a rich life with the book “I Can Teach You To Get Rich”. Become your own financial planner today.