Tips for creating and keeping track of a retirement savings plan
We are not exactly among the earliest when it comes to thinking about our future retirement. We tend to start planning late and, above all, to delegate our peace of mind during this period to the purchasing power of the public pension, something that, according to numerous indicators and evidence, is increasingly reckless.
The well-being of future retirees inexorably depends on having a certain level of savings with which to complement the public pension and thus be able to enjoy the desired standard of living at this stage. Let’s not forget that retirement is a stage of labor inactivity but it does not have to be a stage of vital inactivity.
Given these circumstances, one of the first tasks we should carry out when entering the labor market is to start planning our retirement. It is something that undoubtedly collides with the short-term mentality that often prevails, but a very frequent habit in other latitudes. If you dare to carry it out, take note of these tips to create a step-by-step savings plan for your retirement.
Try to estimate your future pension
There are different tools through which you can estimate the level of your future pension: My Retirement public pension calculator, Social Security self-calculation tool. It will be a rough calculation, especially if you are in the first years of your working life, but it will give you an idea of the level of income that you can count on in your retirement.
Determine the standard of living you would like to have in your retirement
Do you want to spend this stage of life traveling? Do you want to take the opportunity to retire in a house on the beach? Surely you have several objectives that you can quantify. Also try to determine what your monthly expenses would be in retirement and thus determine what the gap would be, if any, between the expenses you need and the income that your pension will provide. Covering that differential would be one of the objectives of the savings you generate for retirement.
Start saving as early as possible
Never dismiss saving at any stage of your life because the amount you can contribute is not very high. Start as early as possible and be consistent. Ideally, try to save approximately 7% of your income for your future retirement and do not rule out a small additional percentage to be able to face possible unforeseen events without compromising the savings destined for your retirement.
Choose carefully the vehicles to save on
It is always advisable to go hand in hand with a specialized advisor. Look for those vehicles that offer you additional advantages to the savings depository. For example, pension plans, with which you can annually reduce your tax bill thanks to the amounts saved. It is important that at all times your savings are channeled into products that are aligned with your risk profile.
Adjust some variables along the way
The process of saving for retirement is a long-term path. Throughout it, there may be milestones that require readjustment of planning. For example, legislative changes that may affect the calculation of the pension. Keep in mind that the simulations are always carried out based on current legislation.
Early retirement can penalize the amount of your pension another variable that you must take into account, especially when you are closer to retirement, is whether you plan to retire at the ordinary age or, on the contrary, you want to retire early. In this second case, you must bear in mind that the amount of the pension would be penalized by the inclusion of reduction coefficients in the calculation. If, on the other hand, you decide to prolong your working life beyond the ordinary retirement age, the pension would be increased as a reward.
Remember the keys to keeping your savings plan on the right track: anticipation, foresight, perseverance and good advice by John Labunski.