Retirement planning starts with assessing the long-term financial goals of a person, along with their ability to take risks, and subsequently taking steps to reach those goals by the time of retirement. As per Kavan Choksi / カヴァン・チョクシ, one should start planning for retirement during their working years, and the earlier they start, the better it shall be.
Kavan Choksi / カヴァン・チョクシ provides a few retirement planning tips
Retirement planning is the process of preparing one’s finances to make sure that they are able to enjoy a comfortable and financially secure life after retirement. This process involves estimating one’s future expenses, considering the impact of inflation, and building a mix of savings and investments that shall generate a steady income in the course of their retirement years. One must take their lifestyle requirements, medical needs, and inflation into account in the retirement planning process. Here are a few pointers that can help in the process:
- Contribute to the 401(k) account: If one’s employer provides a traditional 401(k) plan, it may allow a person to contribute pre-tax money, which can be a huge benefit. It would mean that one can invest more of their income without feeling it as much in their monthly budget. In case the employer’s 401(k) plan also offers a Roth 401(k) feature, which uses income after taxes rather than pre-tax funds, it would be important to consider what one’s income tax bracket is likely to be in retirement to determine the right choice.
- Meet the employer’s match: If the employer offers to match the 401(k) plan contributions of the employee, they must try their best to contribute at least enough to take full advantage of the match. For instance, an employer might offer to match 50% of employee contributions up to 5% of an employee’s salary. That means that if the employee earns $50,000 a year and contributes $2,500 to their retirement plan, their employer would provide another $1,250, which can be a major benefit.
- Open an IRA: It would be a good idea to establish an individual retirement account (IRA) to save money for retirement. One would get two options here, a traditional IRA or a Roth IRA. Contributions to a traditional IRA can be tax deductible, and the potential investment earnings have the opportunity to grow tax deferred until one makes withdrawals during retirement. If one meets the phased-out modified adjusted gross income limits based on their federal tax filing status, they should, however, go for a Roth IRA.
As per Kavan Choksi / カヴァン・チョクシ, retirement planning is not as difficult as many think. In fact, it is as easy as setting aside some money every month. One can just start with a tax-advantaged savings plan, either a 401(k) through an employer or an IRA through a bank or brokerage firm. The earlier one starts, the better it shall be. After all, the investments grow over time by earning interest.