Retirement plans are very important and should start at an early age. Most people want to live their life in peace after the age of 65. To make sure that you retire comfortably, you need a retirement plan and if you don’t have one already, then keep reading.
The myth of 4% rule
The 4% rule is the most widely followed strategy by retirees. It is the amount of money that a person can withdraw from his/her nest egg to make sure that the money easily lasts for 30 years. But the rule has now become a myth. The 4% rule was a method to check the amount of money one needed in his bank account to lead a particular life for about 30 odd years. The biggest reason why the rule isn’t a one-size-fits-all solution is because different people earn differently and after they retire their lifestyles will be different. The economy cannot be always predicted and currently the interest rates are low. So, for 65-year-olds, this rate is quite high but for older people the rate is low.
Multiply by 25
The Multiply by 25 Rule is much better than the 4% rule because it suggests that one should multiply the withdrawal amount by 25. It might not be the perfect method or plan for your retirement but it works if want a substantial amount of money later. For example, if you plan on withdrawing $30, 000 every year, then you need $750,000 for your retirement. The amount changes when you change your withdrawal amount.
1. Save money every year. This is basically the same as the above two rules but with slight differences. Keep aside some amount of money from all your sources of income. It includes your full-time job, part-time job, small business and any other income source that you might be have. Keep it in a separate bank account and don’t touch it. After 30 or 35 years, there should be enough money in your bank account to last for another 30 years or so.
2. Keep an emergency fund. Having an emergency fund is another strategy that you can apply to save money for your retirement. The emergency fund should not be used until and unless you are in dire need of money.
3. Get a part-time job. Getting a part-time job is easy and if you are someone who has a target amount set after retirement, then doing a part-time job helps. The pay won’t be high but an extra source of income is always good.