The Five Basic Steps to Retiring Wealthy

Planning early for your retirement is key to achieving long-term financial goals. The process is quite extensive but need not be too demanding or exhausting. It may seem like a tall order, but it can actually be done in simple steps that you can confidently accomplish (with proper discipline, of course):

Hand holding a Retirement 3D Sphere on white background.
         Image source: bankingsense.com

1. Decide at what age you would like to retire. Setting the time to bid goodbye to employment will give you enough opportunity to start building your nest egg. At any age, however, saving for retirement should start 20 to 30 years earlier. So if you wish to retire at age 60, start planning at age 40 at the latest.

2. Determine how much you will need for retirement. Calculating for your future financial needs as a retiree does not require complex mathematical equations. Retirement income will largely depend on variable factors such as your current earnings, your desired kind of lifestyle, and even unforeseen events like illnesses and medical expenses. For the best estimate, however, it will be of great relief if you seek the help of a professional financial planner to assist in computing for your ideal retirement fund.

3. Build your retirement fund. While stashing cash in the bank is not necessarily a bad idea, it would make more sense to park your money in more high-yielding securities such bonds, stocks, UITFs, or mutual funds. These investments are quite risky in the short term, but they have consistently shown massive returns over time.

4. Know what resources you have. After identifying the size of the fund that you need for your retirement and deciding on which money machine to use in building the fund, now it is time for you to check on where to source the fund. The most common source is your current employment or business. Discipline yourself in allocating a comfortable portion of your income for your retirement on a monthly basis. Other sources that you can also consider are bonuses, commission income, existing savings, liquid assets, or even inheritance if you have received one.

retirement_planner_software
       Image source: toolsformoney.com

5. Periodically review your retirement plan. It is very important that you reassess your retirement plan every now and then. Make necessary adjustments especially that life has plenty of surprises that would often force you to rethink your finances.

Linda O. Foster is a Washington-based federal employee benefits specialist specializing in estate and retirement planning. For more about her background, click here.

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The Five Basic Steps to Retiring Wealthy

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