If you’re approaching retirement and the focus now is how you’ll use retirement cash to cater for the living expenses, it’s wise that you develop a spending plan. Typically, research has shown that most individuals require an income of about 70 percent of their income during their years of working in order to maintain the same standards of living to which they’ve become accustomed. It’s thus ideal that you ensure that you save aggressively for retirement, using every tax merit you can. Let’s have a look at some of the tips that can assist you in planning your retirement fund.
Tips on How to Plan your Retirement Fund
Tip#1: Contacting a Financial Advisor:-
A financial advisor can assist you select a combination of mutual funds, annuities and bonds which meets your personal circumstances and goals. If you’re a beginner investor, it’s ideal that you look for a financial advisor who holds chartered financial consultation designation. Look for an advisor who will listen to your concerns as well as objectives and who will not make recommendations before listening to the facts of your situation.
Tip#2: Selecting a Product Mix:-
This means annuities and mutual funds that help shield you from the risk which any given bond issuer or firm may collapse, taking its bond prices or stock with it. Annuities and mutual funds offer instant diversification as they allow you invest effectively in many different firms with one contribution.
Tip#3: Selecting a Savings Vehicle:-
This could be a SIMPLE IRA, a Roth IRA, 403(b) or 401(k) account at work or for self –employed people it could be an SEP i.e. Simplified Employees Pension Plan. Each has unique merits and demerits, depending on your situation or income.
It’s ideal that you invest in a variety of different types of funds. Try also to spread your assets between different types of retirement accounts. Some accounts like 403(b) accounts, 401(k), traditional IRAs and SEPs are tax-deferred, but the withdrawals in retirement are often taxed as income.
Other vehicles like permanent life insurance and Roth IRAs are tax-free in retirement. However, they do not give a current year tax deduction to a person. It’s thus important that you diversify between tax-free income and taxable sources in retirement and also between bonds, annuities, stocks as well as other asset classes.