Retirement planning is probably one of the most important tasks you will undertake in your life. Saving for your children's college education is important and so is saving for vacations and other unique life experiences. Yet, what should come before all of that – even your children's college tuition – is your own retirement savings.
As the saying goes, your children can always get money for college but you can't get money for retirement, so think wisely about your saving and spending patterns now so that you can enjoy a nice, leisurely retirement in the future.
The problem with retirement planning today is that many people start planning for their retirement way too late. With recessions and tough job economies, many people don't even worry about retirement until they are much older. Instead, they are more concerned with making it to the next paycheck. In fact, almost half of Americans live paycheck to paycheck.
The other side of the coin are the people who do plan for retirement and do start saving at a young age. However, the problem is that they might not be able to save enough to fully retire and live on.
If you think that you need a bit of encouragement when it comes to your own retirement savings, below are three smart ways to plan for it.
1. Open an IRA
Many people wisely start a 401k with their employers (and if you do, make sure you are benefiting from your full company match) but another way to supplement your retirement savings is to open an IRA.
The two main types of IRAs are Traditional and Roth. When you open a Roth, the money you put in will not be taxed when you take it out. This does mean, though, that it's not deductible on your current taxes. A Traditional IRA is basically the reverse. You can deduct what you put in from your taxes. So, if you make $35,000 a year and put $2,000 in your Traditional IRA, you will only be taxed on $33,000 a year. However, there are limits and income caps to both of these, so be sure to learn about the requirements and recommendations from your financial adviser or another trusted source.
2. Invest in Real Estate
Real estate is a challenging business. Many people think that it will be easy to buy a few rental houses, collect rent, and have passive income for many years to come. However, owning real estate can also be a chaotic endeavor. You have to constantly deal with repairs, renters, and other issues. Experienced real estate gurus will tell you that in the end it is worth it. Try your hand at it now, and weather the ups and downs to have income during your retirement years.
3. Plan on a Mixture of Work and Play
Many people plan to work part time during their retirements and that's okay. Whether you are a physician who wants to work at a college clinic once a week or a writer who wants to submit a few magazine articles a month, this is an important part of your retirement planning – knowing how you actually want your retirement to look in the future.
Ultimately, it's important to take some time and think about what you want your future to be. Do you want it to be busy, relaxed, or a mixture of the two? Think about how much you need to have saved for your retirement and then take the steps to learn about retirement planning accounts like 401ks and IRAs to help you reach your goals.