How to Prepare Properly for Retirement
By Indy Summers
Making sure you have enough money to be comfortable in retirement is a process that can take years. However, if you got off to a late start, there are numerous savings options to help you put away enough, even in your later years, to provide you with a steady retirement income. A better way to think might be: What do you need when you retire?
If you have purchased a home, experts recommend that you do the best you can to pay off your mortgage before you leave the working world. The only thing that should be in line ahead of your mortgage is to pay off credit cards or other high interest debt. And of course, make sure that you're maxing any retirement account savings, or at least taking enough to get the maximum contribution from your employer.
If it appears that you won't get your mortgage paid off before you can retire, you have several options. How much house do you currently have, and will you be able to age in place? Is it multi-story, or all on one level? If you have to downsize suddenly after an illness or an injury, you may not get a great price for your current home. However, downsizing before you have to can add to your retirement savings and help you find a great house that will work for you as you age.
Before you can logically plan for how much income you'll need, you must get a grasp on your outgoings. Depending on how you pay your bills, this should be fairly straightforward. Your budget should contain your expenses for:
- your home
- groceries and gas
It may take some time to remember all of these expenses and to break them out by month, but it's crucial you start to track your expenses now. You may find areas where you can reduce your outgoings and lower your retirement needs.
More Than Math
If you have a 401(k) or similar retirement vehicle, it likely offers a retirement savings calculator. This tool will help you look forward and determine how much you'll probably have when you retire, how much you can expect from Social Security, and how long your money will last.
By building a logical budget and having a good idea of your outgoings, you can build a good idea of how much you should be saving right now and what you can expect in the future. Be aware that inflation and healthcare costs will probably take a bite out of your current savings.
How's your health? Do you have any hobbies or interests outside of work? If you have children, are they financially stable on their own, or even enough to help you out in the future?
Keeping yourself in the best physical shape you can is a great investment in your golden years. So is building hobbies and a network of friends that can help you put your most abundant retirement resource, time, to good use. For too many people, their jobs were their primary source of connection. Friends and family had to take a backseat as they built their careers.
Once your career is established, do your best to maintain connections outside of work. Join a gym or the board of an organization you admire. Keep your body and brain moving and stretching so that the isolation and loneliness of old age doesn't damage your health when you retire.
Retirement planning takes diligence. In addition to saving, you need to be aware of what you're spending, build or maintain physical strength and make social connections. You can thrive in retirement!