Only 36% of Americans believe their retirement savings are on track. With current economic conditions worsening, people aren’t able to save as much as they would like to. But saving money is only one of the ways you should prepare your finances for retirement.
A lot of people think of retirement as this far-off reality they don’t really have to worry about yet. This leaves them underfunded or making poor financial decisions when the time comes.
Keep reading to learn eight tips to keep in mind when you’re preparing for retirement.
1. Know Your Social Security Benefits
Most people survive their retirement by living off a combination of their savings and Social Security payments.
Social Security payments are made by the government to assist elderly people with their retirement. These payments are calculated based on your 35 highest earning years. You can start accessing these payments at 62, or delay until 67 and receive slightly higher payouts until you’re 70.
It’s wise to sign up for a Social Security report to calculate how much you can expect to earn from this program. This helps you figure out how much you need to save.
2. Take Stock of Assets and Liabilities
As an adult, you’ll take out an assortment of loans and you’ll own a variety of assets. Before retirement, it’s important to balance these out to make sure you’re not carrying debt into your retirement.
Assets are things you own that have value. These include your cash, real estate, valuable items like art and jewelry, vehicles, bonds, stocks, and investments.
Liabilities are debts you’ll still need to pay off. These include mortgages, student loans, vehicle loans, personal loans, and any credit card debt.
Creating this kind of balance sheet helps guide your personal finances leading up to your retirement. It’s important to pay off your debts before you retire so you don’t have to decrease your monthly budget because you’re still paying back loans. You can also consider which assets you might sell for more money to fund your retirement.
3. Take Out a Life Insurance Policy
If you don’t have one already, it’s a good idea to set up a life insurance policy.
This is a payment scheme that pays out to a chosen beneficiary once you die. This payout gives them enough money to cover your funeral costs and any other big payments they’ll have to make.
It isn’t vital that you have this planned decades in advance, but it does make your retirement years less stressful if you’ve already sorted everything out. It also means your family is covered just in case anything happens earlier than expected.
4. Schedule Your Retirement
One of the best tips for how to retire is knowing exactly when you’ll start.
The best age to retire is usually between 60 and 65, but many people are delaying this because they haven’t got enough money saved yet.
This is why it’s important to have the start date in mind. This way you can set specific financial goals and calculate exactly how much you need.
If you have a long-term partner it’s a good idea to plan your retirement age together. If you’re different ages, calculate what year you would both look at retiring, so it happens around the same time. Strategizing retirement together means you’re less likely to have bumps in the road later on.
5. Plan for Traveling Early
Traveling is one of the things people look forward to most in retirement. It’s the point where you have freedom from employment and funds to get around. But make sure you stretch your retirement funds as far as possible by planning ahead as best you can.
Travel is expensive, so if you don’t plan carefully, you might end up blowing your entire retirement budget in the early years.
6. Determine Your Monthly Budget
As with any budget, saving for retirement means creating a budget. You need to know what your monthly costs are going to be to ensure you’ve got enough saved up to cover the estimated number of months.
It’s also important to have an emergency fund. Since building a retirement fund and emergency fund at the same time aren’t easy, it’s a good idea to build saving into your retirement budget too.
7. Outline a Long Term Care Plan
Something people forget to consider is how their needs change over time during retirement. It’s important to consider this beforehand since care becomes more expensive as the years go on.
Even those in good health should consider hiring a personal companionship service to keep them company and help them with daily tasks as they get older.
As you get older, it’s possible you’ll need to get elderly care. Make sure you research this ahead of time and incorporate it into your budget.
8. Get a Head Start on Hobbies
Sometimes people focus so much on getting to retirement that they forget to consider what they’ll do once they get there.
Spending a few years figuring out your interests and hobbies means you’re better prepared for what to do with yourself once you have time.
This is especially helpful if you’ve got expensive interests that require buying the right equipment or tools. You can make sure you’ve purchased these while you’re still earning money, so you don’t have to budget once you’ve retired.
Preparing for Retirement
Preparing for retirement can seem daunting once you realize how big of a task it is. But if you start early, and keep these tips in mind, you’re going to be prepared when the day comes.
If you want to learn more about the world and how to prepare for it, check out the rest of our blog.