Unless you want to face a lot of hardship when you reach retirement age, it’s important to start planning for your retirement now.
The average life expectancy is expected to increase to 80 and the number will continue to grow.
In your 20s or 30s, you have plenty of time to save for the future and ensure that you’re in a good position when it comes time to retire.
How To Prepare for Your Retirement Early?
You may be asking yourself, “When will I retire?” or “How much money do I need to retire comfortably?”
When you are young, you may be feeling like your future looks bright. You’re in your prime working years and have plenty of time to save for retirement. But taking the necessary steps now to prepare for retirement can make a big difference down the road.
There are 2 main steps to retirement preparation.
- First, you need to find out how much you will need for your retirement. This will give you a clear goal on how much you need to save for your retirement.
- Then, create your very own retirement plan and stick to it.
How much do you need to retire?
The amount you’ll need to save for your retirement depends on the following few questions:
- Where are you planning to retire?
- When are you planning to retire?
- What ripe old age will you be having after your retirement?
Where are you planning to retire?
The location or city in which you are planning to retire largely impacts how much you need to retire. The living cost of each city will largely impact the amount you need to retire. We will use Thailand and United States as an example of the living cost. And we will use the data we got from WorldData.
- Monthly Income USD$496
- Cost of living index 61.8
- Monthly Income USD$4,930
- Cost of living index 100.0
Although people in the United States earn approx 10 times more than those who earn in Thailand, the cost of living in the United States is almost twice as expensive as in Thailand.
This means if you are earning in the United States, and you plan to retire in Thailand, you will have a much better chance to live the life of a king during your retirement in Thailand than in the United States.
When are you planning to retire?
This is the most straightforward. If you are 25 years old now and you are planning to retire at 65, you will have 40 years to earn enough for your retirement.
But if you are 25 years old now and you are planning to retire at 45. You will only have 20 years to earn enough for your retirement. You will need a lot of in your bank in order for you to retire.
And for you to get the numbers right, try using the calculator above to get an estimated amount you may require for your retirement.
What ripe old age will you be having after your retirement?
This question is not an easy thing to answer. According to statistics by TheWorldBank, the average life span is 72 Years Old, this includes 3rd world countries such as Africa and 1st world countries such as the United States. The average life span is highly dependent on the following:
- Accessibility to the healthcare system
The average life span has grown from 65 years 30 years ago to 72 years, today and the average life span is still growing now.
The life span for some of the countries/ cities today are illustrated below:
- Japan, 85
- Hong Kong, 84
- Singapore, 83
- Australia, 82
- The United Kingdom, 81
- The United States, 80
For you to enjoy an awesome retirement lifestyle to prepare yourself to have more than enough retirement funds to outlive your life span.
We will show you some actionable steps you can take to prepare for your retirement.
How To Create Your Own Retirement Plan?
Retirement planning is something that many people overlook, but it is important to do if you want to have a comfortable retirement.
There are many benefits to creating your own retirement plan, such as having more control over your finances, being able to make adjustments as needed, and reducing the risk of outliving your savings.
Here are 3 items you should consider in your retirement plan.
- Home budgeting
- Increase Current Income
Tip. You can get your retirement numbers by using our retirement calculator.
Generally, most people will need to save at least 20% more than required, this is because, as our technology advances, people will live much longer in 10 to 20 years time according to statistics.
Setting a Home Budget
Home Budgeting is the core of financial planning. It is the reason why some people are able to live their life with little to no stress while others are struggling in their day-to-day life.
A person who earns a 5 figure monthly income can stress over money every single day. While his friend who earns a low 4-figure monthly income can have a stress-free life.
This is the power of Home Budgeting.
We have an in-depth article that helps you to create your own personalized home budget in 5 Simple Steps.
Investing For The Future
Investing is the secret to success for many multimillionaires.
“Let money work for you!”
But instead, many people work for the money and thus are always caught in the rat race of chasing after the money.
Learn to invest in assets that help you earn money. But there is always a catch, investing does come with a risk, but you have the power to minimize this risk to close to negligible.
There are ways of investing you can learn and follow to become rich and successful.
We don’t reinvent the wheels, we learn from the masters of investing. Mentors such as Warren Buffett will be your mentor and guide you to success.
If you have guessed it.
Yes, I am referring to the books written by the legend of investing, and here I have found a few of the best investing books you should read that will definitely help you in your journey.
Increase Your Income Sources
“How can you increase your current income?”
The question which almost everyone I know has asked at least once in their life. I am no exception and thus I have asked around and done some research to find out how.
In my search in thinking of ways to increase my income I have found out that it all leads to 2 simple idea
- Increase your assets
- Reduce your liabilities
Question: “What are assets and liabilities?“
Answer: “Assets are things that give you money and Liabilities are things that take money away from you.”
This sounds too simple!
Yup, it is.
The theory may sound simple but to do is not as easy.
According to Robert Kiyosaki, the author of Rich Dad Poor Dad, the house you are staying in is not an asset because it is taking money from you every single day.
Will you sell your house and live in the streets because of that? No, you will still stay in your house and pay the mortgage.
What other option do you have?
You can rent out a few empty rooms of your house to a few tenants and start earning a few hundred bucks per month, your house is now an asset!
Some other ways are such as creating a passive income stream, investing, or creating a business.
You can check out how to easily create a passive income in my other articles. We will show you how to generate a passive income step-by-step.
- Complete list of passive income ideas
- Easy passive income ideas to start
- Starting a passive income with your expertise
Why Should You Plan For Your Retirement Now?
Retirement is the period of life when we will love to be enjoying and not work at cafes clearing plates. A well-thought-out retirement plan is the basis of great retirement life.
We should always plan our retirement early. If you are already in your 30s or 40s and looking to retire in 20 years’ time. It is your responsibility to plan how much you need to retire.
If the numbers from the retirement calculator show that you don’t have enough savings for retirement. Try this out!
Try using the 3 tools in your retirement plan:
But I will highly suggest you approach a good financial adviser to help plan for your retirement.
Retirement planning should be done as early as possible. A retirement plan done when you are still young will allow you to have enough time to adjust and save up for your future.
- How To Retire Early With $50,000 Passive Income (3 Easy Ways)
- 9 Reasons Why You Should Start Saving Money
- 7 Biggest Money Traps to Avoid in your 20s and 30s (Money Mistakes)
- Do you need Rainy Day Fund & Emergency Fund, And What Is The One Fund for Financial Success?
- How To Save $10,000 A Year Fast With Little Money (5 Easy Steps)