You may not realize it, but your retirement is actually coming up pretty fast, and you have to get ahead of it and plan for it not, not later. Things aren’t the same as when your grandparents or even your parents retired, and you’re going to need to be smart about your money if you want to have a safe foundation to rest on.
Your situation will be unique to you for many reasons, however right now you need to think about your retirement, what you want to do, how luxurious do you plan for it to be, and prepare for the cost of that to be much higher than you expect.
How to Handle Uncertainty
Anything could happen in the future. Health scares, natural disasters, economic downfalls, and other such things will be thrown at you. These obstacles are inevitable, and the best-laid plans are those that help you prepare for the uncertainty.
It goes back to the old saying “Don’t put all of your eggs in one basket” and you need to take the time to look at the various factors in your retirement plan and ask yourself “How can this go wrong?” and if so “How am I going to handle this?”. Take the worst possible outcomes and look for a realistic solution to them, just to be safe. Chances are that you might not need it, but in asking yourself a few serious questions you will give yourself a long-term peace of mind.
Say you have a 401K, but what will you do if you lose your job and need to take money from it early? Can you recover from that What if you or your spouse need extra medical care and your insurance isn’t enough? You probably don’t want to think about these sort of things, but you must if you want to have peace of mind for your future.
Whatever situation you’re in, you need to give yourself a few options so that you aren’t left stranded and alone.
How to be Financially Independent
Retirement is now about being financially independent, it not longer involves getting that nice gold watch at 65. While some people wait until they turn 65, some people are choosing to retire early, while others find themselves having to work much later in life than they had anticipated.
There is no magic number, and each person needs to take an honest look at what kind of quality of life they expect to have and how much it’s going to cost over the long run. Once upon a time companies gave out pensions, however nowadays they use 401K’s to take some of the financial responsibility off of themselves and put it onto you. At first these programs aren’t exactly easy to understand, but if you’re smart about it then you can bend them to fit your needs.
You need to take an honest look at your yearly income and expenses and then try to account for things such as inflation and the steady rise in housing prices across the country. Many people fail to account for the fact that, due to the growth in modern medicine, they’re likely going to live much longer than they originally thought. Worldwide people are living longer and more active lives and while you might plan on living to 85, what are you going to do when live to see 105? How will you budget for an extra 20 years?
You might also want to consider that you’ll be living differently when you retire. The kids will have moved out, and having a larger house might not be as practical, so you might decide to sell and move into something smaller, or you might want to buy an RV and travel around for a while.
The sooner the better when it comes to planning, investing, and saving for your future. You may need to take a few days to really crunch the numbers and try to get a realistic figure so that you can start figuring out how much you need to save. Chances are you’ll have to make some compromises now so that you won’t have to later on.
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What is a 401K?
A 401K is an optional plan where you can have money take from your check and placed into a retirement fund before taxes. As of 2017 you’re not able to put up to $18,000 into the fund without being taxed on it. Some employers still pay into the fund when you do, however this isn’t always the case.
It may sound confusing, but it can be explained like this. Let’s say that you ear $60,000 a year, and $10,000 is put into your 401K. This means that when you file your taxes, you would only be taxed on $50,000 per year. You’ll have $10,000 safely squared away, and you won’t be losing those last few hundred dollars on taxes.
Each company is different, so be sure to dig deep and see what exactly your employer offers you. Many people miss opportunities because they’ve failed to read the fine print.
What does Social Security mean in Retirement?
Signed into law in 1935 by President Roosevelt, Social Security is provided to ensure the elderly never have to live in poverty. Like the 401K a percentage is taken from your check and you can collect benefits after you retire. The problem is that it isn’t enough money to live off of by itself. There have been many changes to the program, and no one should view it as anything more than supplementary. If you need to then you can collect benefits before you turn 65, however there are some problems with doing that so be sure to do some detailed research first.
What is Medicare?
Medicare is a national insurance policy that’s funded from federal payroll taxes that covers United States citizens age 65 and over as well as younger individuals with qualifying conditions that currently provides coverage for over 55 million people. Likely you’ll need another insurance or decent sized bank account because it only covers about half of expenses.
Just as with Social Security, it’s a great program but is by no means something you should rely on completely. As we get older, health issues often increase and you don’t want to be caught having to pay a hefty chunk of your yearly budget because of an unexpected injury or illness.
Should You join a Retirement Community?
A common goal across the nation is to have your home paid off before you retire, but many people forget that even after retirement there’ll still be taxes, utilities, maintenance, insurance, and other costs that come with owning a home.
When planning your retirement you might want to look into the option of either selling or even renting your property and moving into something smaller with less overhead and expenses. Having this big home now is great for kids, but when you’re older and want to retire is it really the best option?
You might find yourself needing to join an assisted living community. These places can be great for seniors, especially in these modern times with the extra security and fun activities available. This option isn’t for everyone, but you should still look into it.
How does Healthcare Affect my Retirement?
At some point, your body will break and it’s up to you to make the most of it while you have it. If you turn on the news, you will hear constant headlines about the state of our healthcare system, and in this situation you really have to make sure that you are covered. While Medicare will cover some of your costs, even a routine visit to the doctor can cost several hundred dollars, and without some kind of additional insurance you will be stuck paying out of your own pocket.
When planning your retirement one of the most important things you can do is research and set up that extra insurance policy.
Staying fit in Retirement
Once you feel like you’ve got your money and your housing situation sorted you’ll have to face the facts if you’ve been letting those extra pounds pile up. If you just let yourself go then later on in life you’ll find yourself not out seeing the world, but sat in a chair, forced to watch while others have fun without you.
Even something as simple as making it a habit to walk for a mile every day can lower your risk for various ailments such as high blood pressure, heart disease, and type two diabetes.
You’re never too late to start making a change for the better, so be sure that you’re taking care of your health. In this case, an ounce of prevention is worth far more than a pound of cure, and by getting into shape and staying active early in life, you actually save yourself money down the road in medical bills.
Creating a will After Retirement
No one wants to think about it, but you need to get this settled, keeping in mind you can change it later, so that your family will be cared for and your final wishes carried out. A legal will is more for your peace of mind than anything else and will often spare your family a lot of headaches and confusion. These are not hard to file nor are they expensive, and they ensure that your assets are managed accordingly. Without a will, the state will often take control of your estate and this is not something that you want to have happen.
Retiring with a Smile
You no longer need to fear that your senior years will be a struggle or filled with boredom and dread, you can live a life of fun and exploration. You’ll have to start planning now though, to ensure you get that happy future.
Every person is going to have their own goals of when they want to retire and what kind of lifestyle they expect, and while some people can easily live off of very little your situation will be different.
View your money as a tool and find a way that you can make the most of it through your employer, investments or other means. It might mean that you have to make a few compromises and sacrifices now, yet your choices can have a major impact on if you are able to retire at 50 or if you are still in the workforce 75.