How to Prepare an Early Retirement Plan
When it comes to making an early retirement plan, one must consider something of a good thing that comes with little sacrifices. You don’t need to wait for a sudden financial meltdown which shall force you to take an early retirement. You may not have a huge amount of money to spare for a luxurious retirement, but it doesn’t mean it’s too late to plan for your early retirement. As long as you’re younger and capable, you can still hope for a promise of security in your future years. You must have a solid picture of how you want your retirement to be like, and you may want an early retirement plan at the price of a lower living standard.
Truth is, when it comes to what you want for your retirement, there is no wrong answer. Ask yourself just how much savings you have and how much will you collect from you social security and other defined benefit plans when you retire. Making an early retirement plan is also definitely better than having none. You may want to invest at a higher amount that promises greater returns, or you may go for the minimal. The choice shall always be yours to make. Just consider your age right now, and think of how much you would have saved when you reach your planned retirement age. This is a personal decision where you can control how much you want to earn when the time calls for it.
Here are 5 Ways in Making the Most Out of Your Early Retirement Plan:
1. Create a Plan
Ask yourself honestly what kind of lifestyle you want when you retire. You may retire before your retirement age, where taxes or deductions can be applied on your retirement benefits. When you make a plan, don’t forget to include the cost of health care. Retirement costs a lot of money, since you will not be working when it happens. Whether you are planning to save for your 401k, IRA ( Individual Retirement Account ), or a traditional savings account – just start saving and stop procrastinating.
2. Know Your Benefits
You need to maximize your investment in your retirement plan and the benefits that come with it. Your social security will pay you up to 40% of your earnings and you may get in touch with the Social Security Administration to know more ( www.ssa.gov ). Your social security benefits will protect you and your family if you become injured or dead before your retirement age. You may also check your employer’s pension or profit-sharing plan and learn the benefits that you ( and your spouse ) will get. If you don’t have a retirement plan, ask your employer to start one for you. If you have a traditional or Roth IRA, don’t forget to review your benefit statement. When you reach 70.5 years, you are normally required to receive your required minimum benefits from the IRA by year-end. Know that you can withdraw early from the IRA with an annuity payout, or your usual ten percent penalty for an early 401k payout will be waived if you are 56 years and older.
3. Review Your Retirement Benefit Statement
You must review your early retirement plan’s benefit statement which will show you the total benefits and the amount you will have. With your social security benefit, you will receive a social security statement three months before your birthday each year. This shall include your earning records, list of benefits, and scope of protection you will have when you experience disability or death before your retirement age. You can also review your spouse’s retirement benefits which can include you, receiving benefits as well. Whatever plan you choose, read the consent form very well before finally signing the agreement.
4. Make an Investment
Making an early retirement plan also means finding the best investment opportunities for your hard-earned money. You can invest extra money in long-term investment funds with greater yields like bonds, mutual funds, or stocks. If you do so, you must be aware of the risks involved. Also, you may set aside your very own retirement savings account, which shall be readily available when the time comes.
5. Stick to Your Goals
Nothing is truly tough than sticking to your early retirement plan and making sure that you don’t touch the savings you make until your age of retirement comes. If you withdraw early, you may have deductibles and may lose tax benefits which could have been used for your retirement. By starting early, you give more time to yourself to grow your money. Make your retirement plan your top priority and never withdraw soon, unless dire circumstances call for it.
It is rather alarming that less than half of America’s population are seriously investing their time, effort, and money in making an early retirement plan work – specially when reports say that many are spending twenty years in retirement. You will always choose between a modest lifestyle and more wealth when it comes to making your retirement plan work. If you can save at least ten percent of your income for your retirement, do so and start making your contributions today. This guide shall be your starting point and you may talk to your employer, bank, or an expert advisor to get answers to complex questions. Your Commitment Shall Spell Success!
RESOURCES:
IRS.gov. “ Retirement Tips for Individuals. “ April 2009.
http://www.irs.gov/retirement/participant/article/0,,id=133069,00.html
US Department of Labor. “ Top 10 Ways to Prepare for Retirement. “
http://www.dol.gov/ebsa/publications/10_ways_to_prepare.html
Bankrate.com. “ Take 5 Steps Toward Early Retirement. “ 2009. MSN Money.
http://moneycentral.msn.com/content/Retirementandwills/Retireearly/P88419.asp
Rubin, Michael. “ Retirement Saving: How Much is Enough? “ 2009. About.com.
http://retireplan.about.com/od/howtobegin/a/howmuchtosave.htm
