10 Retirement Planning Essentials You Need To Know Now

Adam Palasciano
4-min read
ferrantraite / Getty Images
ferrantraite / Getty Images

Retirement should be a period of hard-earned rest and relaxation after decades of hard work. The last thing you’ll want to be doing is agonize over your finances after you call it quits at your 9-to-5.

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The U.S. Department of Labor (DOL) reported that only about half of Americans have calculated how much they need to save for retirement. At the same time, the average American spends about 20 years in retirement.

If you find yourself confused and uncertain about your retirement savings, there are several tips and tricks to help you get on track.

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10 Retirement Planning Tips To Consider

Here are 10 ways to prepare for retirement and ensure a secure financial future, according to the Department of Labor:

  1. Don’t stop saving money and reach your goals: Saving early, often, and with consistency is the name of the game. You’ll grow your money over time and benefit from the power of compound interest the longer you save. Remember, it’s never too early (or too late) to start saving your money.

  2. Ask questions: Be inquisitive about financial planning, especially when it comes to retirement. Consider doing some research of your own — and perhaps consult a financial professional who can advise you on retirement saving best practices.

  3. Know how much money you’ll need in retirement: Experts say that you’ll need about 70 to 90% of your pre-retirement income to maintain your standard of living when you stop working. Saving for this is no small or easy task, so starting early and carefully planning your finances is crucial.

  4. Inquire about Social Security in advance: On average, Social Security retirement benefits replace 40 percent of pre-retirement income for retirement beneficiaries. Your Social Security benefit amount is determined by how much you earn throughout your life and the age you choose to start collecting. You can check the Social Security website and use their retirement calculator to estimate your monthly benefits.

  5. Contribute to your employer-sponsored 401(k) plan: If you’re offered an employer-sponsored 401(k) plan, be sure to contribute as much as possible. 401(k) contributions lower your taxes and some employers offer matching contributions up to a certain percentage. It’s important to contribute at least enough to get the full employer match, since it’s free extra money that you won’t want to leave on the table.

  6. Save money in an independent retirement account (IRA): In addition to saving money in a 401(k), you can also create and contribute to an IRA on your own. You can choose between a traditional IRA or a Roth IRA, the former consisting of pre-tax contributions and the latter consisting of after-tax contributions. The beauty of a Roth IRA is that all of your contributions (including any gains) are 100% yours tax-free if you start making withdrawals after age 59 ½.

  7. Inquire about your employer’s pension plan: If you’re fortunate enough to work for an employer that still offers a pension plan, be sure to understand the terms. In some cases, you may have to work for a certain number of years before you’re eligible for the pension. It’s usually the case that your monthly retirement benefit increases the longer you work for the employer.

  8. Ask your employer to start a retirement plan (if they don’t already offer one): If your employer doesn’t already offer a retirement plan, it’s not a bad idea to ask them if they’ll start one. Employer-sponsored retirement plans tend to be a key benefit and can help you save for your future, especially if an employer-matching contribution is involved.

  9. Consider the basic principles of investing: Understanding how investing works is important to reach your long-term financial goals. Simply, the earlier you start investing your money, the longer it has to grow and compound before you start dipping into your funds in retirement. Diversifying your investments provides a hedge against risk and can protect you from losing too much of your hard-earned money.

  10. Don’t touch your retirement savings: This should go without saying, but it’s important not to touch your retirement savings until you enter retirement. Making withdrawals before age 59 ½ results in penalties, which will reduce your balance even further.

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This article originally appeared on GOBankingRates.com: 10 Retirement Planning Essentials You Need To Know Now