Step 6: Save for Retirement
Retirement savings is about creating an income when you are no longer working. Most retirement accounts are inaccessible without penalty until a certain age.
What are your sources of income in retirement?
- Social security
- Retirement savings
Types of retirement accounts
- Roth IRAs
- Traditional IRAs
- SEP IRA
- Simple IRA – employer-sponsored
- 401(k) – employer-sponsored
We’ll discuss the advantages and disadvantages so you can decide which account best suits your needs.
Purpose of retirement
Defining your purpose is going to drive your motivation to achieve your final goals. As an example:
“I would like to have enough income from my investable assets to leave work and spend more time with family and traveling”.
The purpose is the spend time with family and traveling.
Plan for retirement
Look at the retirement funding options and types of income-producing assets (401(k), IRAs, brokerage, real estate, small side business, etc.), decide which will fit your needs and timeframes, and then create a funding plan by adding money (monthly, quarterly, yearly) for each investment vehicle. What are the assumptions you are making (returns on investments, amount of dollars it produces), what is the method to measure your success (review, quarterly/yearly/3yrs/5yrs, etc.), and how flexible you will be on changing the time frame (will you extend the deadline).