Planning ahead for your retirement is crucial if you want to maintain your current standard of living well into your golden years. These days, it’s no longer possible to rely totally on Social Security and a company pension. Most people opt to invest their money, both in regular investments such as mutual funds, stocks, and bonds and in registered tax-free savings plans, such as IRAs or 401(k)s. Your first step towards planning ahead for your retirement is understanding how much money you will need.

Making an Estimate

When it comes to estimating much money you will need to maintain a comfortable lifestyle during your retirement, you might not know where to start. The first thing to do is calculate your annual income. Most people aim for 70% of that figure. Of course, there are other financial obligations that you may have to factor into your estimate. For instance, will you have paid off your mortgage by the time you retire? Keep in mind that you are also likely to pay more for insurance and health care. Additionally, you might have specific plans for your retirement years, such as traveling the world or purchasing a new home. These dreams should be factored into you

Expected Income Sources During Retirement

You may have several sources of income when you retire. The first is Social Security. You can make a calculation of your estimated Social Security benefits based on your anticipated earnings. A company pension plan that you’ve paid into might be an additional source of income during your retirement. Combine your Social Security and pension plan payouts in order to see how close or how far you are from your estimate. If your expected retirement income is lower than your estimate, you will need to find a way to come up with the difference. Moreover, remember that you will need enough to cover a period of twenty or more years, depending on how long you live.

Making Up the Money

If you need to make up the difference between your expected retirement payouts and the retirement money you think you’ll need, consider investing your money. Investments that will be used to fund your retirement shouldn’t be overly risky ventures – while these types of investments are more likely to offer high returns, it’s not worth the potential risk of losing all of your savings and having nothing to fall back on.

However, you don’t need to play it totally safe. A diversified investment portfolio, consisting of money-market funds, stocks, and bank Certificate of Deposits (CDs) is the best option, as you’ll have growth and security.

Choosing Your Investments

It’s important to add stocks to your retirement investment portfolio, as they offer the most potential for high returns over the long-term. If you’re investing twenty years or more in advance, stocks are the best option. But if you find yourself stressed out or anxiety-ridden following the ups and downs of the stock market on a daily basis, you might want to seek out other investments to balance the risk.