The Smart Investors

[TheSmartInvestor]

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Retirement Planning is great to build your future Paycheck. A retirement plan can be likened to growing a money tree that will feed you when you stop working. Here’s how to plant it:

Step 1: You’ve got to imagine your retirement life. So you need to
Ask yourself:
- Where will I live? Will I live in the City, village or abroad? It's very so crucial to have this at the back of our mind
- How much will I spend monthly? You should be able to determine the amount you will spend on a monthly basis
- When do I want to retire? People need to decide their retirement age between 55 and 65 and 70. Having a specific answer about retirement age is an essential factor.

Step 2: Calculate How Much You Need
Use the 25x Rule:
1. You need to multiply your yearly expenses by 25. For instance, Maria earns $3,000/month, that means she earns $36,000/year. So, applying the rules, gives you - $36,000 x 25 = $900,000. It means, you needed $900,000
Free Tool: Use this free retirement plan calculator to calculate the amount you needed NerdWallet Retirement Calculator

Step 3: Choose the Right Accounts
Choosing a retirement account will definitely help you save a significant amount of money and it will also reduce taxes. Here’s how to choose:

1. 401(k) (For Company Workers)
- What it is: It is a retirement account that is offered by your employer.
- Best for: It's best for people that are have full-time jobs.
For instance, If you earn $60,000/year and save 10% ($6,000) in your 401(k), it means your taxable income will drop to $54,000, which is great. So, if you save enough more in the account, it means you’ll have more free money.

2. IRA (Individual Retirement Account)
- What it is: This is a personal retirement account you open by yourself, not through your job.
- Best for: It's the best account for freelancers, part-timers, or anyone wanting extra savings.
- 202t Contribution Limit: It's advisable to save up to $7,000/year or $8,000 if you’re 50+
- Tax Benefit: Your contributions may lower your taxable income depending on your income.

3. Roth IRA (Tax-Free Growth)
- What it is: It's a retirement account where you pay taxes now and then withdraw tax-free later.
- Best for: This is suitable for young earners or those who are expecting higher taxes in their retirement.
- 2025 Contribution Limit: Save up to $7,000/year or $8,000 if you are 50 and above.

Step 4: Invest Smartly
- People below fifty can split their investment between 80% stocks (through VOO ETFs) and 20% bonds.
-People who have reached the 50-year mark and beyond should distribute their investments as 60% stocks and 40% bonds and cash.

Step 5 : Plan for Surprises
- Healthcare : It's crucial to save an extra $300/month or probably get long-term care insurance.
- Inflation: You need to get yourself prepared for inflation and plan towards it as well.
- Social Security: It's important to check the estimated benefits in your Social Security.

Step 6: Pay Off Debt Before Retirement

Step 7: Review Every Year
It's very important to check the following:
- Are your investments growing?
- Did your goals change?
- Did new laws affect taxes?
Putting all of these into consideration will keep you on track.

3 Big Mistakes to Avoid
Starting Too Late: Even if you start with $100/month at 25, it’ll grow to $500,000 by 65 (7% return).
Ignoring Taxes
All Cash Savings: If you put all your cash in savings, it will lose value to inflation. So, you need to invest in stocks/bonds.

[MarketMavin]

To create a retirement plan, you need to estimate the costs, where you want to retire and what kind of life you want and pick an age you want to retire, say 60, as a goal on which to base your savings and investment.

[Peaktrader]

Start with what you want your ideal life to look like when you retire. Then try to do an estimate of your monthly expenses and choose the retirement age. And then save and invest on a regular basis using accounts such as 401k or IRA, to build your money.

[Olumide]

It is also important to consider the following factors for your retirement needs:
Health:
This is very important.As we age, our immune systems become weaker, making us prone to certain health conditions. Your medical history is also crucial. This must be part of your retirement needs calculation.

Debts
Outstanding payments from mortgage, and other types of credit must be part of retirement planning. You must plan to pay them off before finally retiring.

How long do you expect to live for?
Your lifespan cannot be determined with certainty but you can estimate that by analysing your present health condition. Attending to your health conditions requires money.

What will you be doing after retirement?
Do you want to start a foundation, go to school or build a new home? This will determine how much you will need when you retire.

Inflation
Inflation reduces the value of your savings. You can use the average inflation rate to determine how much more you need to add to your retirement need to cushion the effect of inflation.