Having a standard life flexible retirement plan entails more than just saving for the future or for rainy days; it also entails protecting yourself from future disasters. We have noticed, or better yet, learned through research studies, that most individuals make lots of mistakes while in service.
Working for the federal government, state government, private companies, or your personal business requires a proper plan on what to do when you will discontinue the services.
Individuals who are lucky to start working on time usually have lots of achievements. This is debatable because it is dependent on the type of job, the individual’s qualifications, and the individual’s overall living circumstances. In some countries, there are stipulated years an individual has to work in order to retire.
Typically, it is at least 30 years of service. During these 30 years, the individual is expected to further his or her education, marry, raise children, build a house(s), and most likely start a business that will sustain him and his family when the job is terminated due to retirement.
Financial crisis during the later stages of life is closely associated with a lack of planning. Lack of planning during the active years results in frustration, anxiety, depression, and, in most cases, suicide.
Surprisingly, most governments have excellent plans for engaging people in service by training and retraining them on how to plan for the future. These pieces of training have served as an eye-opener for some people, through which they have achieved a good retirement.
BENEFITS OF HAVING RETIREMENT PLANS
The benefits associated with retirement plans can never be overemphasized. Through our data gathering, we have found that the pensions paid to retirees are not usually enough for these people.
Retirement comes with lots of challenges, including relocating from the location where the individual lived while serving, getting a good place to live, managing illnesses that come with aging, etc. From all indications, people with standard life flexible retirement plans live a healthier life than individuals without.
1. Reduces Financial Stress: Having a retirement plan helps in many ways, one of which is reducing stress related to finances. Finance has been found to be one of the leading causes of stress, as described in the book “Dear Stress, Let’s Break Up” The author emphasized the significance of having a proper financial plan, both for people strategizing their lives, such as getting married and for people hoping to reach or get to retirement age. With a proper financial plan, retirees can key into investments, start up a business, or save huge amounts of money to be used when they are retired. Having a retirement plan does not always imply saving money now, but rather having a plan (short or long-term) that will yield money later. Old age feels lonely, and it is more disastrous when a financial crisis is added to it.
2. Return on Investment (ROI): Starting a retirement plan on time saves a lot of money and can guarantee a huge return on investment. Depending on the individual’s financial capability, this is a great way to invest.
Take, for instance, an individual who saved up ten thousand dollars ($10,000) and went into a fixed deposit at the bank or got a landed property. After ten years of this investment, the parcel of land that sold for $10,000 now costs $50,000. Isn’t that a huge success? and a smart way to invest? Think!
3. A Backup for Those in the Private Sector: Life after retirement for people in the private sector is usually a difficult one. If you think about it, after working for 30 years or more, you retire with nothing to fall back on. That will be a hell of a life. Starting a retirement plan early for individuals in the private sector is a lifesaver.
4. Early Retirement Option: People currently working who wish to retire early in life should start making early retirement plans. With the example given in number 2 above, if that investment should last up to 20 years, that’s a total of $100,000. Your guess is as good as mine.
5. Inflation: You will agree with me that with time, the prices of things will go up. Investors consider this and plan well for the future. Having a source of income is usually tagged as an unhealthier way of living, as individuals in this category go about borrowing to meet their needs.
HOW TO CHOOSE THE RIGHT RETIREMENT PLAN
For individuals who are considering having a retirement plan, here are critical things to consider in order to gain the full benefits of having one.
1. Good Time Frame: Having a proper retirement plan is good, but the individual involved should consider the time frame. The time frame should start from the age at the moment when the person is making such an arrangement until when the individual will actually retire. Investment experts advise people to start this planning early in order to give themselves enough time to get from point A to point B. If the time frame is long, the RIO becomes huge.
2. Define Your Needs: In order to reap the benefits of your investment, you must first define what you want. When this is defined, it makes everything easier for you and your investment expert.
3. Investment Goals: As you map out your needs, you have to develop achievable goals for your investment. Your objectives will help you decide what to do next, what to do first, how to do it, and so on.
BEST RETIREMENT PLANS IN THE USA
1. IRA plans
The US government has been praised for the wonderful opportunity given to individuals in the service who are close to retirement by creating IRA plans. The IRA plans came in as an option, or rather an alternative, where workers over 50 and other individuals can contribute up to $7,000 and $6,000, respectively. The IRA plans vary and include:
- Spousal IRA: As the name implies, a spousal IRA is typically reserved for the spouse of a worker who earns income to fund it. This implies that this kind of plan permits a non-working spouse to enjoy the benefits of an IRA. This implies saving money or making retirement plans for a spouse who never worked. E.g., a housewife
- Traditional IRA: this kind of IRA plan allows individuals to make savings for retirement with pre-tax dollars. This implies growing a tax-free savings account, which can only become taxable after retirement. This is the number one option for intending retirees, as this plan is very popular. It provides the individual with access to an unlimited amount of investment.
⦁ Roth IRA: The Roth IRA retirement plan is a great opportunity for those who key into it. The contribution for the Roth IRA plan is made from money made after-tax payments. This implies that the individual is not compelled to make another tax payment since the contribution is a part of taxable income.
2. Defined Contribution Plans
This particular retirement plan was introduced in the 1980s, and it includes 401(k)s. This plan is popular in the retirement industry, as in 2019, nearly 86% of the Fortune 500 companies only presented defined contribution (DC) plans instead of the traditional retirement plan. Individuals who key into the DC plan also have the opportunity to enjoy the Roth as well as the 401(k)s. The 401(k) plan is closely related to the Roth plan. 401(k) plan payments are made from pre-tax wages, individuals are allowed to make contributions from tax proceeds, and no further charges are incurred until after retirement when a little tax can be charged.
The thrift savings plan (TSP) is a prototype of a 401(k) plan and is typically reserved for government workers and those in military service. Individuals who wish to key into this plan have five low-cost investment options to make, including S&P 500 index fund, a bond fund, an international stock fund, a small-cap fund, and a fund that invests mainly in Treasury securities.