About Retirement Planning
Retirement planning entails estimating how long your retirement years will be, how much money you need to save and where you want to spend your retirement years. If you don't have a definitive answer for any of these questions, useful approximations can help you set a guideline.
Where to Live
You should decide where you want to live in your retirement years. Some places are more tranquil or conducive for senior citizens than others. Some states also have lower tax rates than others.
Saving Enough Money
It’s important to save enough money to achieve your financial goals. You should plan for a definitive span of time that your retirement years will last. Use the average life expectancy for American males and females when making this projection. A 65-year-old American male can expect to live 17 more years on average. A 65-year-old American female can expect to live 20 more years on average. If you need help determining how much you should save, try using the following guide drafted by Charles Farrell, author of "Your Money Ratios: 8 Simple Tools for Financial Security." According to Farrell, these are the milestones you should reach in your lifetime as you save for retirement:
- By the age of 35, you should have saved 1.4 times your annual pay.
- By the age of 45, you should have saved 3.7 times your annual pay.
- By the age of 55, you should have saved 7.1 times your annual pay.
Your 401(k) Plan
If you can afford to add more funds to your 401(k) plan, this can give you an immediate tax break because your contributions are not taxed. Over the long term, slightly increasing the amount you pay into your 401(k) can pay off in your retirement years.