It will be here sooner than you think. Retirement—the day you’ve looked forward to since your first boss yelled at you or your first extended overtime stint—can produce a host of emotions, ranging from boundless joy to abject fear. It’s not easy to take a long, hard look at your finances or to contemplate your mortality, but doing so is the only way to protect yourself from life’s uncertainties when you retire.
The earlier in your career you start preparing for retirement, you’ll be better financially upon retirement. With more than half of working population in the US having no retirement saving, it’s scary to think about their future. Their only alternative is to continue working till they drop. Unless you want to be in the same boat, start preparing for your retirement today, start saving for retirement today.
Below steps describe how you should go about preparing for your retirement. Irrespective of your age and income, follow the steps to secure a bright future for yourself and your loved ones.
How to financially prepare for Retirement
Take Stock of Your Plans
Do you want to enjoy your retirement without working for money? Or do you want to spend retirement working part-time?
Two generations ago, retirement meant a quiet life of gardening, bridge games, and television marathons. Now retirement is as diverse as retirees themselves. Think about what a happy, healthy retirement looks like for you. Would you like to work part-time? Consult on projects you love?
Take up a career as a freelancer? Or are you more interested in starting a winery or goat farm? Your retirement dreams should color your retirement plans, so make a budget and a list of goals. Then separate the “must-haves” from the “like-to-haves.”
Get a Financial Consultation
No one should have to plan for something as big and intimidating as retirement alone. Consultation with a financial planner can help you tie up loose ends while inspiring you to save more, spend less, and get real about your retirement options. Some questions to ask include:
- What is the projected cost of my ideal retirement?
- Do I need to continue working part-time?
- How much should I have in savings?
- How long will my savings last?
- How can I maximize my investment yield while minimizing my risk?
- Is my portfolio sufficiently diversified?
- Where should I keep my money after I retire?
- Do I have wiggle room for extra expenses?
- Are there additional options for funding my retirement dreams?
Save More in Retirement Fund
At least I am working to enjoy my retirement. I have an income from a day job and income from this blog. I almost earn equal money from this blog and from the work. I am maximizing my retirement saving accounts (401(k) and IRA). I am taking full advantage of the employer match.
So if you want a peaceful retirement, start saving more in your retirement account. If you can, max out your contribution. Even a mere $100 a month more in your retirement can bring more than $200 per month post-retirement, if you start early, due to the power of compound interest.
You can even think of buying an annuity or a life insurance as an investment. Although mathematically annuity and life insurance don’t make much sense due to a very low-interest rate. These are options only when you have surplus money after maxing out retirement accounts.
There’s no better time than now start saving for retirement. Start today! (Related – Best practices for retirement saving)
Review Your Options
If you’re anything like most soon-to-be-retired folks, you have no idea what benefits you can expect upon retiring. You need to know exactly what you can expect to get. Begin by reviewing your Social Security benefits to assess your monthly income.
Check with your employer’s human resources department to explore options for your pension and continuing medical care. Some employers allow you to take your health plan with you when you retire.
And if your employer offers matching contributions to your retirement account, max out those contributions; don’t turn down free money just because you want to spend a few extra bucks right now!
Be Honest About Your Health
Healthcare costs can eat up a significant portion of your retirement income, with the average retired couple needing $220,000 to cover medical expenses throughout their retirement. Start living a healthy life. Practice things like Yoga, meditation, daily exercise stop on overeating and eating unhealthy fast food.
Get a physical, and get your health risks under control by losing weight, quitting smoking, and instituting an exercise regimen. If you know you face serious health concerns, be honest with yourself about the potential risks. Ask your doctor how much you can expect to spend, and budget accordingly.
Find Alternative Income Sources
If you can’t fit the pieces of your retirement puzzle together, it’s time to explore alternative options for income post-retirement. Those might include:
- Selling items on eBay, Etsy, or another online marketplace. If you’re crafty or love collecting vintage items, this can be particularly lucrative.
- Looking into a reverse mortgage to cover additional expenses.
- Finding sources of residual income. For instance, some websites pay writers a monthly salary based on page views.
- Offering consulting services to local businesses.
- Pushing your retirement date back a year or two.
Sure, retirement can be daunting, but it’s the well-deserved break you’ve waited for a lifetime. It’s time to start thinking about what your post-work days can look like.