If you’re considering taking a permanent vacation from the workforce, it’s important to carefully evaluate your financial needs. After all, you’re planning for a future in which your income may be greatly reduced. Here are some tips to get you started in preparing for a retirement in which your money will last.
It’s a good idea to start with a nest egg of a few thousand dollars, then continue to contribute as much of your excess income to this rainy day fund as possible.
1. Create a Budget
Your first step should be to create a budget based on your expected income and expenses in retirement. Although you may no longer be working, you might still have income from investments, rental properties, pensions, or Social Security that can add up to a tidy sum. When it comes to estimating your expenses, you can use your current expenditures as a starting point, then turn to an online retirement resource to help identify costs you may not be considering. Bear in mind that just as with any budgets you may have followed earlier in life, you might need to find a way to cut expenses if your income falls short.
2. Decide When To Collect Social Security
If you’ve paid into Social Security your entire working life, you may think it’s the best plan to start collecting your benefit as soon as you retire. While that may be a good idea for some, there may be some logical reasons to delay your disbursements. It can be a smart move to attend a Social Security benefits seminar and fully research your options so you understand the ramifications of collecting sooner rather than later.
3. Build Emergency Savings
People who have been wise with their finances their whole lives likely already understand the value of having an emergency fund to cover unexpected expenses. Everything from major home repairs to grave illnesses can befall even the most careful planner, so be sure to be ready with extra savings to handle these potential expenses. It’s a good idea to start with a nest egg of a few thousand dollars, then continue to contribute as much of your excess income to this rainy day fund as possible. It’s rare to find someone who bemoans that they saved too much money for emergencies.
4. Assess Your Health
While your health and finances may not seem related, your ability to pay for future medical expenses can be a major consideration when retiring. If you are already dealing with chronic conditions, you’ll want to including managing your situation in both your budgeting and your funding of emergency savings. If you’re heading into retirement in generally good health, it’s smart to try to keep it that way. Commit yourself to getting routine checkups, eating well, and exercising regularly to mitigate the potential physical and financial drain that can result from poor health.
With a bit of advanced planning, you can step into retirement feeling confident that you are prepared financially. Design a budget, evaluate your Social Security benefits, fund your savings, and take stock of your health in order to put yourself on a path that will let you enjoy life away from the daily grind.
5. Come up with a Plan B
Life happens, and sometimes even with all preparation in the world, we cannot foresee what will happen in the future. Luckily, there are many way to recover your finances even later in life. It is no surprise that equity release is the number one choice for many due to the many advantages the later life mortgages offer. You can easily calculate how much equity you could release online and speak to an advisor about the next steps. So even if something unexpected comes up you will be covered financially.
