Saving For Retirement: Best Ways to Prepare

Have you also wondered how much money you need when you retire?

According to a Bankrate survey, around 55% of Americans must catch up on retirement savings. A recent survey also revealed that only 35% of Singaporeans had a retirement plan.

But have you also wondered how much money you need when you retire?

Are you also one of those 55% or 35%?

A good retirement plan ensures you have enough money to live well after you stop working. You must save more money to travel and buy more things during retirement. The amount you need to save depends on how you want to enjoy your retirement.

At Buffett Online School, we also believe in investing in great companies you understand, and utilizing Free Investing Resources to help you start your financial freedom and investment journey is one of the best ways to learn.

If you still need to consider preparing for retirement, this article might help you decide how much you need and how to prepare for it.

Ways to Prepare for Retirement

1. Start and continue saving

Whether saving for retirement or something else you want, keep doing it and stay focused on your objectives.

If you have not started saving, now is an excellent time to begin. You can start with a small amount and aim to increase your monthly savings. The earlier you start saving, the more growth opportunities for your money.

Remember, it's always early enough to begin saving.

2. Know your retirement needs

Retirement costs a lot. Professionals estimate that you'll need around 70 to 90 percent of the money you earn before retiring to keep up your current lifestyle after you stop working. Take control of your financial future. The secret to a safe retirement is preparing in advance.

3. Get to know your company's retirement plan.

If your employer offers a traditional retirement plan, find out if you're included in it and know how it works. Request a personal benefit statement to gauge the value of your benefit.

Before switching jobs, know the implications for your pension benefit. Familiarize yourself with potential help from past employers. Determine if you're eligible for benefits from your spouse's plan.

4. Contribute to your employer’s retirement savings plan

If your employer provides a retirement savings program like a 401(k) plan, enroll and put in as much as possible. It will lower your taxes; your company might add extra money, and automatic deductions simplify the process.

Compounding interest and delaying taxes can significantly increase your savings as time passes. Learn about your plan. For instance, determine how much you should contribute to receive the total company contribution and how long you must stay in the program to get that money.

5. Keep Your Hands Off Your Retirement Savings

Avoid accessing your retirement savings presently. If you take your retirement savings now, you'll forfeit the initial amount and the accrued interest. Additionally, you might lose out on tax advantages or be subject to withdrawal penalties.

If you plan to switch jobs, leave your savings within your existing retirement plan or transfer them to an IRA or your new employer's plan.

6. Invest your money

After you can set aside some of your monthly earnings for savings, it's time to consider putting those funds into investments.

Investing enables your money to grow through compound interest. It's crucial to ensure your retirement plan aligns with your objectives. The sooner you begin, the smoother the process will be for you.

7. Prioritize Your Physical Well-being

In light of the substantial expenses associated with healthcare, maintaining good physical health is essential for ensuring financial wellness during retirement.

Even though retirees frequently disregard healthcare expenses, they remain a prominent concern and continue to rise unchecked.

8. Think About Future Healthcare Expenses

It's essential to take care of our well-being even before our retirement. However, considering the worst-case scenario for future healthcare expenses, it is still important to safeguard your retirement savings.

Consider getting long-term care insurance, which can assist with costs like home health aides.

If you secure coverage now, your premiums will be more affordable than waiting a few years, and you'll have a lower risk of being declined by insurance companies.

9. Choose Your Living Arrangements

Where you decide to live during retirement can significantly affect your expenses. For instance, if you sell your house in a pricey area and relocate to a lower-tax state with a condo, your costs drop significantly, freeing up funds for other essential things.

Alternatively, consider staying in your current town but downsizing to a smaller, more affordable home. Conversely, you might opt to reside in an area with high living expenses and taxes to be close to family or move to a bustling city, which might require you to be more frugal with your spending.

Types of Retirement Plans

To help you choose which one suits your goal and preference, we list some investment accounts for retirement savings here.

Retirement Plan	Pros	Cons
Central Provident Fund (CPF) Singapore	Wide range of uses besides retirement It can be used for healthcare, education, and housing It has four accounts that can be used for a specific goal	Limit to money your CPF account can receive each year Limited monthly contributions
Malaysia’s Employee Provident Fund (EPF)	It is also open for non-Malaysian citizens and non-permanent residents (but not compulsory) Provides retirement benefits and invests in public equity and fixed-income markets	Inaccessibility because it is kept in a locked period It will change into taxable income if funds are withdrawn before five years Limited returns in EPF
Traditional IRA	Available to anyone Many plan and investment choices Offer valuable tax benefits You won’t owe tax until you get your money at retirement	Low contribution limits It can be costly to get your money because of taxes
Roth IRA	Taken out contributions at any time without any taxes Withdraw retirement savings tax-free	Income restrictions Low contribution limits No tax break for contributions
SEP IRA	Freebie retirement account for employees Higher contribution limits for self-employed	Money is more easily accessible
Solo 401 (k)	Able to contribute more than other individual retirement plans Some plans allow traditional pre-tax or Roth (after-tax) contributions	Limited investment options More complicated to set up than IRAs
Simple IRA	provide an opportunity for workers to make pre-tax salary deferrals	Employee contribution limit of $15,500 for 2023, compared to $22,500 for other

How much money do you need for retirement?

The amount of money a person should save for retirement will vary depending on factors like their current lifestyle, desired retirement lifestyle, financial situation, and responsibilities. Experts often recommend having 10 to 12 times your yearly income when you retire.

For instance, if your yearly income is $70,000, you should aim for $700,000 to $840,000 in retirement savings.

Another suggested approach is dividing your desired yearly retirement income by 4%. If you want $70,000 per year during retirement, you'd need 70,000 / 0.04 = $1.75 million saved for retirement.

You can also calculate using Bankrate’s retirement calculator to help you understand the amount you'll need and whether you need to extend your working years beyond your initial plans.

However, the crucial aspect is having practical expectations about your objectives and appreciating the gradual rise in expenses as you age, particularly healthcare costs. These should always be part of saving for retirement.

Join Our Free 2-Day BOS Value Investing MBA

At the Buffett Online School, we believe in learning the right investing mindset and system to cultivate emotional detachment and grow our wealth safely and substantially in the long run.

Our next 2-day BOS MBA Value Investing Online Bootcamp is happening soon! We will teach you how to use Warren Buffett's proven investing method to maximize your portfolio.

Remember, you can cultivate the right investing mindset and unlock your potential to build wealth through intelligent investing. Together, we can create a network of educated investors who make informed decisions and contribute to their financial well-being!

In the meantime, feel free to check out some of our blog posts to continue learning. You can also join our BOS Telegram channel for more investing insights!