Navigating the Path to Financial Freedom: Essential Steps in Retirement Planning

Having enough retirement savings is a constant worry for many adults. Benefits like Social Security currently help people finance their lives after leaving the workforce, but adequate retirement planning is beneficial to help families have a growing nest egg for their future.

Not everyone who's planning for retirement may understand the right steps to financial freedom. Consider the guide below to learn important retirement planning steps and tips to pursue a more secure financial future and live comfortably in your golden years.

How To Create a Financial Retirement Plan: Important Steps and Considerations

Though many people view retirement as a time for relaxation, for others, it's a time to live life to the fullest without the demands of a career. Everyone's lifestyle, needs, and financial situation are different. As such, it's necessary to create an individualized financial retirement plan that's suitable for how you intend to spend your years as an aging adult. 

Retirement planning is a multi-step process that helps you work towards saving sufficient income to fund your ideal lifestyle once you stop working. It's a long-term plan that can help you avoid running out of funds or relying solely on Social Security Benefits, which usually isn't enough. 

Here, you'll find the top steps for retirement planning to aid in your future income strategy development. 

Understand Your Life Goals

Financial freedom looks different to everyone. On the surface, it's a vague goal that doesn't explain how you intend to live the lifestyle you want or how to fund it. So, the first step in creating a retirement income strategy is understanding your life goals.

Someone who intends to live their golden years in a booming city won't have the same financial goals as someone who prefers simple rural living. Consider these questions to help determine your future goals as it pertains to your retirement:

• What lifestyle do you want, and what will it require?
• How much will you need annually to fund that lifestyle?
• What is the latest age you want to have the passive income or savings to fund your lifestyle as a retiree?

The more details you have about how you want to spend your golden years and the money it will take to fund it, the easier your retirement planning will be. 

Start Retirement or Pension Planning as Soon as Possible

Investing in stocks and bonds is a great way to earn passive income that you can use later in life. Yet, it takes time to grow your funds through investments. You must also consider volatile markets that cause fluctuations in how much investors earn or lose. 

For these reasons, it's often beneficial to start investing and planning your retirement as soon as possible. Early investing provides more time for compound interest to build. Also, if the stock market dips, you'll have time to reorganize your investments to minimize your losses. 

Getting personalized retirement advice from a respected agency that offers retirement investment planning can help you create a diverse investment portfolio that grows according to your financial needs. 

Consider Your Healthcare

Sometimes, people forget about their healthcare needs when planning for retirement. Short- and long-term medical care is often necessary later in life due to age-related physical and mental health conditions. Without careful planning, you may not have enough money to cover medical expenses like at-home nursing, hospitalizations, and prescription drugs. 

Medicare is available for older adults. However, this federal health insurance program may not accommodate all of your healthcare expenses or needs after you retire. You must also pay Medicare premiums. 

When planning for retirement, be sure to consider your medical expenses and long-term care. Living comfortably as a retiree should include not worrying about your healthcare needs or leaving your family to carry that burden. 

Keep Track of Your Credit Score

The future is uncertain for everyone. Still, a good credit score will generally open more doors for you and your family now and later in life. 

Your credit score determines your ability to take out loans, get credit cards, and refinance a home. It also influences your interest rates for everything from mortgages to life insurance premiums. 

A poor credit score indicates reckless consumer spending habits to financial institutions. It carries a lot of weight. Monitoring your credit score now and addressing negative markers like delinquent payments or excessive credit utilization is a beneficial way to ensure your score is in good standing in the future. 

Choose Retirement Investment Accounts

Retirement savings plans come in many forms. For many people, having a 401(k) plan from their employer is ideal. With a 401(k) retirement plan, your employer will deduct a percentage of your pay to save and invest. Many businesses also match employee contributions, boosting the plan's growth up to a certain limit. 

Still, a 401(k) isn't the only type of retirement savings plan you could have. Another option is an individual retirement account that you can contribute to over the years. Roth IRAs offer tax-free qualified withdrawals when you retire. 

No matter which retirement investment account you prefer, try to contribute at least 10% of your monthly pre-tax income to build the account. If 10% isn't feasible, contribute what you can and adjust as your financial situation improves.

Don't Forget Estate Planning

Retirement planning should also include estate planning to assist with your family's financial future upon your passing. Estate planning and drafting a will gives your loved ones a detailed outline of your final wishes and how you wish to disperse your money, property, and other assets. You may also set up a trust to control and monitor your beneficiaries' inheritance. 

Start Planning for Your Future Today

Our financial advisors work with other professionals, like attorneys, to help our clients plan their retirements according to their needs. Contact Lakehouse Family Wealth at (440) 589-7700 today to request a consultation about retirement planning.

The content provided in this post is meant for educational purposes only and should not be taken as legal advice. Our professionals offer financial planning but cannot offer legal assistance. Click here for a full list of disclosures.