Once you retire, do you know how you will maintain your lifestyle? How can you be sure that you will have enough money? Do you know what strategies you will use to meet your needs and enjoy to the fullest after so many years of work?
According to experts, when you retire you will need between 70% and 80% of your income before retiring. Planning for retirement is a challenge. More so when you consider the present situation like inflation, increase in health costs and uncertainty regarding the availability of Social Security benefits. Moreover, life expectancy has increased, and thus you will need more money for your retirement years. For all these reasons, it is most important that you plan wisely for your retirement.
Your goal should be to save for the future while conserving your lifestyle and comply now with your financial commitments. For this, you must establish a savings plan of at least 10% of your gross income. In addition, you must eliminate unnecessary expenses and save for your retirement through a savings plan.
Retirement plan: your ally for the kind of life you deserve
A retirement plan is a savings framework in which you contribute a determined percentage of your salary. This method provides the option of establishing investment strategies that go from the most aggressive to the conservative, the latter recommended if you are close to retirement age. Check with your financial planner the available options; it’s never too early to establish your retirement plan. If you already have one through your employer, review the strategies. Remember that you can reduce the impact of the market volatility by placing your money into stocks that invest in different sectors.
Advantages of the plan
- Your contribution to a retirement plan will be made through payroll deduction, making it easier to save for that purpose. You may increase, reduce or reinstate your contributions when you feel it is convenient.
- You will be able to save in tax payments on the money contributed annually to the plan, just as with the income or earnings these contributions generate. The law allows postponement of tax payment until the money is withdrawn from the plan.
- Generally, you may save a higher amount than in an individual retirement account (IRA).
- You may withdraw a portion of your savings while you work, as long as it is allowed under the plan provisions.
- Generally, when you retire you may transfer the balance to which you are entitled to, another qualified plan or IRA in Puerto Rico.
- Your contributions may help you pay less income tax. They may also be of great benefit in the future, if you retire when you are in a lower tax bracket.
It is possible that you decide to make a higher or lower contribution than suggested, depending on your future plans and how you anticipate your personal circumstances upon retirement. Remember that a large part of the money you will need during your retirement years will be the product of your savings while you were working.