Saving for Retirement: A Guide for Modern Blacksmiths
As a modern blacksmith, you may find it challenging to think about saving for retirement. You are likely focused on building your business and honing your craft. However, it is essential to start planning for retirement as early as possible to ensure that you can enjoy your golden years without financial worries.
In this guide, we will walk you through the steps of saving for retirement and provide tips on how to maximize your savings potential.
Step 1: Determine Your Retirement Goals
The first step in saving for retirement is to determine your goals. Do you want to retire early? Do you want to travel extensively during retirement? Or do you plan on living a quiet life close to home?
Once you have established what kind of lifestyle you want in retirement, estimate how much money you will need each year. You can use online calculators or consult with a financial advisor who can help make projections based on expected inflation rates and investment returns.
Remember that the cost of living will continue to rise even after retiring so factor that in when making estimations.
Step 2: Choose the Right Retirement Plan
The next step is choosing the right retirement plan. As a self-employed individual or small business owner, there are several types of plans available:
– Traditional IRA (Individual Retirement Account)
– Roth IRA
– SEP (Simplified Employee Pension) IRA
– Solo 401(k)
A Traditional IRA allows individuals under age 70½ with earned income from employment or self-employment to contribute up until they reach age 72 now due changes made by SECURE Act legislation passed at end of last year . Contributions are tax-deductible if certain requirements are met but withdrawals during retirement years will be taxed as ordinary income.
Roth IRAs allow contributions after taxes have been paid upfront and qualified withdrawals during retirement years are tax-free .
SEP IRAs allow employers with fewer than one hundred employees or self-employed individuals to contribute up to 25% of their income or $57,000 in 2020.
Solo 401(k)s are available for business owners with no employees other than a spouse. Contributions can be made as an employer and employee meaning higher contribution limits – $57,000 for those under age 50 and $63,500 for those over age 50 in 2020.
Step 3: Determine Your Retirement Plan Contribution
After choosing the right retirement plan that suits your needs, determine how much you need to contribute each year by dividing your annual retirement goal by the number of years left until retirement.
For example, if you want to have $1 million saved by the time you retire in twenty-five years and assume an average rate of return on investments at seven percent per annum , then you would need to save approximately $23,000 per year.
Keep in mind that this is just a rough estimate; factors such as investment returns and inflation rates will impact your savings calculation.
Step 4: Prioritize Your Retirement Savings
As tempting as it may be to put off saving for retirement while focusing on growing your business or paying off debt, prioritizing your retirement savings early on will pay off significantly down the line.
Establishing automatic contributions from your checking account into your chosen retirement plan is one way to ensure consistent contributions every month without having to think about it consciously.
It’s important not only to make sure that you’re contributing consistently but also trying increase these amounts periodically when possible. Even small increases can add up over time especially with compounding interest working its magic!
Step 5: Diversify Your Investments
Diversification is critical in any investment portfolio including those focused towards saving for retirement. Avoid investing all your eggs into one basket so-to-speak because market fluctuations can happen unexpectedly like we saw during COVID-19 pandemic last year .
Having different types of assets like stocks, bonds, and real estate can help mitigate risks of market volatility. Consider consulting with a financial advisor who specializes in retirement planning to create a diversified investment strategy that aligns best with your goals and risk tolerance.
Step 6: Revisit Your Retirement Plan Regularly
As you progress through life events like getting married or having children, it’s important to revisit your retirement plan regularly and make any necessary changes accordingly.
Your income may increase or decrease based on the success of your business; you might want to adjust how much of an emergency fund is available for those unexpected expenses that come up along the way.
Also take into account how long it will be until you retire as this number decreases so too should risk levels in investments since there is less time left for growth potential . A financial advisor can help guide these decisions during periodic evaluations.
Conclusion:
Saving for retirement is essential for modern blacksmiths looking to enjoy their golden years without financial worries. By determining your retirement goals early on, choosing the right retirement plan that suits your needs, prioritizing contributions consistently over time while diversifying investments across asset classes – you can maximize savings potential towards enjoying a comfortable retired lifestyle later down road.
Breakthrough Blacksmithing 