Checklist for a Retirement Plan
Retirement planning requires that you have a firm idea of what you want your retirement to look like. Your retirement plan may be complex, so you should consider making a checklist. A checklist is appropriate to keep you on track to accomplish your goals. The checklist is a list of tasks you will be doing or benchmarks you need to meet.
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Define Income Needs
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You need to know what your income needs are before you try to save for them. Your income needs are driven by your lifestyle and the expenses you incur as a result of that lifestyle. These expenses might change in retirement. A good retirement calculator will give you a rough idea of your income needs based on your current expenses, and an inflation factor as well as an investment factor that will add interest to whatever you decide to save.
Research Retirement Plans
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You should understand your retirement plan options. Your employer may offer a retirement plan called a 401(k) plan. Or, he may offer you a Savings Incentive Match Plan for Employees (SIMPLE IRA) or a Simplified Employee Pension (SEP IRA). All of these plans let you contribute money to an investment account before you pay tax on the money you contribute from your paycheck. However, you can only contribute money to the plan through your employer. When you leave your job, you can no longer use the plan. After you've made your contribution, you choose from a variety of investments. These investments drive your savings and help you to achieve your financial goals for retirement. But, employer plans are not the only plans available. You may choose individual plans like Traditional IRAs and Roth IRAs. These plans allow you to contribute money regardless of where you work.
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Learn About Investing
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You must understand what you're investing in. You need to have a basic understanding of how companies make money, how stocks and bonds work and how mutual funds work before you do any kind of investing in a company or a financial product like a mutual fund. The greater your understanding of the investment, the less chance you have of losing money through ignorance. A financial professional can be an invaluable resource in this respect. But, you may also wish to pick up a book on investing.
Research Social Security Benefits
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You should understand your Social Security benefits. Your Social Security benefits are not payable until at least age 62, but you have a few choices as to when you can take benefits. Your full Social Security benefits won't be paid at this early age. Instead, you may select your full retirement benefits at a later age. Your full retirement benefits will depend on when you were born. You can estimate your retirement benefits online through the Social Security Administration.
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References
- "Practicing Financial Planning for Professionals (Practitioners' Edition), 10th Edition"; Sid Mittra, Anandi P. Sahu, Robert A Crane; 2007
- "Life Insurance"; Kenneth Black, Jr., Harold D. Skipper, Jr.; 1994
- Social Security Administration: Estimate Your Retirement Benefits
