Tower Loan Blog

How to Plan for Retirement

Planning for the golden years doesn’t have to be a headache if you have a plan to follow. The basic goal of preparing for retirement is to have enough money to stop working, enjoy your freedom, and live comfortably.

To help you with the process of how to prepare for retirement, we’ve compiled this quick guide to get you started.

Keep reading to learn the answers to, “how do you plan for retirement?”

What is Retirement Planning?

Learning how to plan your retirement requires several steps and will need to be tailored to your specific financial standing. However, there are a few factors that will apply universally. While there’s no such thing as the perfect plan, the best retirement plans will include:

  • A timeframe and an end goal
  • Investment schemes
  • A savings plan

So, how do you prepare for retirement, and when should you start?

Retirement Planning Tips

To begin your retirement journey, you need to start somewhere.  The best place to begin is by setting realistic goals.

Retirement Goals

When you first decide how to plan for retirement, you need to think of how you want to spend that retirement time. Do you want to purchase a little plot of land away from it all, do you want to spend your days with grandkids on your lap, or do you want to go dancing on cruise ships amidst the islands?

Whatever your dream may be, let that be a goalpost to can help direct your retirement plans.

Save Between 10% to 15% of Your Income

While you will need a large portion of your income for daily living, you should devote between 10 to 15 percent of your salary toward your retirement. Whether it’s in a 401(k) or a mutual fund, the sooner you start, the faster you can realize your retirement goal.

Pay Down Your Debt

If you’re dealing with the weight of debt, it can seem impossible to save for the future. Even if it means reducing your retirement savings allocation to five percent, you should take care of any debt as soon as possible. There are numerous schemes for paying down debt, but the fastest and most satisfying is to pay off high-interest debt such as credit cards first.

Importance of Saving Early

The unhelpful answer to when you should start saving is “yesterday.” However, to keep these tips more pragmatic, let’s go over how to retire comfortably starting today.

You may already envision yourself enjoying your time away from the workforce. Still, to make that vision into reality, you need to utilize every minute before that time to build a retirement savings account. By starting early, you can leverage against riskier assets for a larger potential gain. As you increase in years, you’ll want to pull away from high-yield, high-risk investments in favor of more stable funds. The later you start saving, the less risk you can take to grow your retirement savings.

Figuring out how to plan for retirement means starting as soon as you can.

How to Invest for Retirement?

One of the scarier retirement planning ideas that will make most people shy away from is the concept of investing. While the core idea behind investing is relatively simple, the industry utilizes jargon and fear tactics to keep most casual investors out of the game. While you may already be investing towards your retirement through an employer-based 401(k), IRA, Roth IRA, or Roth 401(k), you shouldn’t avoid exploring stocks, options, annuities, and alternative investment funds. 

This isn’t to say that you should empty your 401(k) to throw it into a popular IPO (initial public offering.) Instead, you should consider diversifying your retirement portfolio to include more volatile financial instruments. 

Here are some basic tips for beginners learning how to plan for retirement.

 Compounding Interest

While you may feel like you don’t have enough set aside to begin investing, you actually don’t need that much to start, thanks to the concept of compounding interest. You can set aside a small amount, and by starting early enough, you can dramatically grow your account as the interest builds on it.  While it’s growing from that initial start, you can continue to add to the account, growing it faster.

 Mutual Funds

Unless you have time to review the fundamental, sentimental, and technical analysis behind a few particular stocks, buying into a mutual fund is the easiest way to enter the market. A mutual fund is a portfolio of several different stocks that a firm has selected to oversee. It works by leveraging multiple investors’ money to invest into a group of stocks that have been historically tracked to determine their potential yield.

Don’t Withdraw Until You Retire

The hardest thing you may have to do is decide to leave the money in the account. Sometimes the market experiences volatility, not in your favor, and you may be overtaken by fear. However, the worst thing you can do is pull the money out and actualize the loss. The secret is to leave the money in until you retire, maximizing your initial investment.

Tower Loan Can Help

It can be challenging to concentrate on how to plan for retirement when you have a financial emergency. Thankfully, you have access to a safe and reliable method of obtaining money now. With Tower Loan, we make it easy to apply in 10 minutes or less through our online loan process. Apply now to get started!