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Whether you’re taking on your first full-time job, have been in your field for many years or are preparing to retire, it’s never too late to prepare for your financial future. To best prepare workers for the eventual transition to retirement, here are some tips suggested by the Department of Labor, that can help you during your transition:
Phase 1: The Early Years
As you are just beginning your career, you’ll want to make sure that you begin to save for retirement as early as possible. With time on your side, this will help ease the stress of retirement preparation in the future. You’ll want to:
- Enroll in your company’s retirement plan to begin the easiest form of saving as soon as possible.
- Avoid debt early, ensuring that you always make timely payments on loans or credit card debt that you accrue. The sooner these expenses are handled, the easier it becomes to save for retirement.
- Determine a monthly savings rate and a goal. The earlier that you figure out how much money you would like to have by retirement will help you to determine how much you should be saving per paycheck to meet your goal. Tools to find the right amount can be found on the Department of Labor’s website.
Phase 2: Mid-Career Analysis
Once you have your plans in place, it’s important to check in on your savings and readjust when necessary. Marriages, divorce and welcoming children can all change your financial needs and should be readjusted to accommodate your retirement plans. You may also want to:
- Plan for emergencies: Things like medical bills, job loss, the death of loved ones and home repairs may take priority over your need to save for retirement. Having a separate savings account for your emergency needs and retirement savings is a great way to make sure you don’t accidentally dip into your future funds. Make sure to budget how much money you should put away per account before emergencies happen to best help yourself in the future.
- Check your target saving rate: As inflation decreases and increases over the years, its critical to make sure your target saving goals will still be beneficial to you in the future. Make sure to check in on this rate every so often and adjust accordingly.
- Know your spousal rights: Depending on your situation, you may have rights to some of your spouses’ retirement benefits in the event of a divorce or separation. In turn, they may also have access to your benefits. If you find yourself in a change of marital status, you’ll want to discuss your rights and requirements with a planner or lawyer.
Phase 3: Heading Into Retirement
As you near closer to retirement, you’ll have a better grasp on what your finances will continue to look like. You’ll want to keep making adjustments as you now know what your near future expenses will be and to save in order to be as financially comfortable as possible. Additionally, you may want to:
- Budget your retirement: Taking the information you have on your saved income and any additional income that you will receive, create a budget of your expenses and make sure your finances will cover it. Make adjustments accordingly to ensure you don’t have a savings gap to close before retirement.
- Remember health insurance: Health care is an expensive necessity, especially as you age. You’ll want to make sure that you choose and then budget for a plan that will cover your needs without breaking the bank. If you’re retiring at an earlier age than most, this is especially important as Medicaid doesn’t go into effect until the age of 65.
- Be smart with your funds: Develop a spending strategy to manage your retirement funds so they last. Take taxes, investments and emergency funds into consideration. You should enjoy the reward of your labor, but still be wise with your money in order to care for the financial needs of your future self.
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