Retirement planning can be done in five simple steps. These steps are determining retirement income goals, investing for retirement, creating a retirement plan, saving for retirement, and protecting the money already invested for retirement. Retirement planning is basically a systematic process of following up with the appropriate actions required to reach these same retirement goals and then again setting new retirement income goals. The easiest rule of thumb states that you must replenish 90% to 100% of your pre-tax retirement income to live a retirement life in today’s extremely tight economic environment. As we all know, in order to reach our retirement goals, it is essential to maximize our pre-tax dollars so as not to fall into the trap of living beyond our means. Also, once you have reached your retirement income goals, it is important to continue to invest for retirement and build upon the initial retirement savings.
There are many retirement planning tools at your disposal; however, one of the most important retirement planning tools is your pension plan. When you retire, you want to make sure that your retirement plan matches your retirement income and that your pension plan ensures your basic needs after you are no longer working. A retirement pension plan ensures that you will be able to live the lifestyle you have always known and that your family will still be able to enjoy decent living standards after you are gone.
Your portfolio is another important tool in retirement planning; your portfolio is your after-tax funds, which provide growth and safety during retirement. It is important to carefully consider the type of portfolio you will create, whether it be a traditional IRA with a Roth or both, and also the type of risk involved with the portfolio. By creating a diversified portfolio of after-tax funds, you will create a secure base for your eventual retirement and will be able to enjoy life after retirement in a comfortable and financially secure manner.