It is a real nightmare to reach the retirement age and find that you have not saved much enough to get financial support. Most people get into such a predicament due to their unwise or untimely planning. This article makes an effort to educate you on making prudent retirement planning and avoid such disastrous possibility. Here are some simple ways to save money for your retirement.
It is not a magic but logic how you can save a huge sum for your retirement days
Start early when it comes to do retirement planning. If you start planning at the ripe age of 50, you can’t save much for your twilight days which are drawing nearer. If you start at the age of 30, you can definitely save more. Every year, section a part of your monthly earning. It is better if the saving sums up to $2,000 at the end of each year. However, with increment in your pay-scale, try to push this target further.
Saving for retirement days requires a little bit sacrifice at present. This sacrifice is justified considering the fact that you will get a financial peace of mind. Make a little adjustment with your monthly expenses so that you can save a good part of your disposable income for this retirement purpose. Several investment vehicles are there but ensure a safe ride with government bond, IRA, 401K planning etc.
The riskier investments are more tempting on the ground of promising rewards. Investing into them will not be very bad unless you invest a lot. Diversify your retirement investment and consider investing into less riskier schemes. After all, you definitely hate the idea of losing your hard-earned money, is not it?
Have you taken a mortgage loan? Do you have any outstanding loan? If yes, think about paying them off. Being saddled with mortgage burden while you are approaching the retirement age is not a good idea at all. Through mortgage payment, you retain the equities and also have some assurance to live in your own house. And with passing of days, your equities become more valuable.
If possible, invest in a second property. Real estate makes a good return on investment. And having a second home earns you an excellent equity to make good use of in times financial instability.
Retirement planning is not an easy thing to do. Extensive market research, proper planning, appropriate approach and right vision are some of the components to outline a workable retirement plan. Following some simple steps like those stated above will ensure a peaceful post-retirement sailing as you have always dreamt of.
Financial Preparations to Take Before You Retire
Retirement is a big step for anyone to take. After a lifetime of working every day for years, it can seem impossible to just stop all together and adjust to a life without your job. The biggest worry that most people have is how they will be able to afford their current lifestyle without having the income from their job that they have relied on for so long. This is an understandable concern and it is something to be addressed before you quit your job for good.
Many people make the mistake of thinking that social security and benefits from their 401K will be enough to allow them to pursue all the things they want to when they retire. The truth is that those incomes are often just enough for you to make ends meet. If you want to have financial security and the ability to spend money on activities you didn’t have time for when you are working, you will need to plan for more when you retire. Here are some financial preparations you should take before you retire.
Invest in alternative forms of income
There are some really great ways that you can keep earning valuable income after you stop working. One popular method that many people have found success with is investing in real estate. You can hire a company to manage the property for you, so you can get an income each month without doing any work. You can use TitleMax to get the extra money you need to invest in the right opportunity. Find a method that will work well for you in the future and invest now.
Set savings goals for yourself
If you want to have extra money for things like travel when you retire, you will need to plan accordingly. Set savings goals for yourself each month that will get you to the goal that you are working towards after retirement. Having this extra cash is not only a great emergency fund in case something unexpected happens, but it is also a great way to plan for the future you will have after retirement.
Determine what your new budget will be after you retire
Your budget will change a lot after you retire, and you should be prepared for those changes. Not only will be losing your income, but you also won’t have a lot of the expenses that come with working, like commuting costs and work clothes expenses. It is a good idea to think about all of these aspects and try to plan an exact budget for your life post-retirement. This way, you will know exactly how much you will need financially so you can prepare for it now.
Eliminate all debt
The best way to improve your financial standing in any stage of life is to reduce the amount of debt that you owe. When you retire, you will have less free cash to make debt payments, so eliminating that expense before you retire is essential. Find a way for you to pay off your debt before you retire to start fresh in your new life.
3 Old-Fashioned Retirement Rules to Discard
Old-Fashioned Retirement Rules to Discard
I am not much in love with rules of thumb when it comes to finance though their significance to the rank and files cannot be downplayed. From experience, I know everyone is not willing to research on the financial topics and they love to stick by easy-to-remember conventional rules. On the flipside, these guidelines are often not correct and outdated as well, keeping you away from fulfilling your financial goals.
When people think about saving for their after-retirement life, most of them get attracted to these conventional rules. Unfortunately, these are often claimed to be facts even though most of them are no longer applicable. Here are two obsolete finance rules as well as what you should follow instead:
$1 million will make your life comfortable
The first rule of thumb says $1 million is a nice sum to live on whereas the reality is it is no longer a big figure that it was used to be a decade ago. It cannot ensure a comfortable life for 20-25 years, particularly if you live in a posh area and enjoys a high living style.
Though it is not a hefty amount anymore, it is still a dream figure for many Americans. In fact, less than 5% of total Americans earn $1 million in their lifetime. For many, it’s so frustrating to accumulate the amount that they will give up the idea of saving at all.
What you should do: Make it a target to save eight times of your final salary. There is no easy-to-remember figure; rather things are more personalized to make the goal achievable for any worker irrespective of his/her salary slab.
Replace 80% of your last salary after retirement
It’s not an out-of-date advice. However, it’s too much generalized and you can hardly figure out how much to save for sunset phase of your life. How much you will need in your post-retirement life depends on activities during that time. If you want to travel around the world, you must have more nest eggs. If you experience frequent or serious health problems, more retirement income will be needed than what you would if you stay fit and fine just like what you used to be in your heydays.
What you should do: Figure out how much you need, depending on your present lifestyle. The conventional rule does not consider several variables in a retiree’s life, including cost of living, health issues, leisure activities etc. Take time to question yourself about what you want to do after retiring from service and how much you need to support your lifestyle.
Strategies to Maximise your Retirement Income
Saving money for retirement doesn’t have to be a complicated process. While many day-to-day sacrifices are required in order to maximise savings, the benefits of building a healthy retirement fund surely outweigh the small indulgences that are sacrificed in everyday life. One dollar saved today can turn into a hundred dollars for tomorrow.
1. Take Advantage Of Employer Contributions
Depending on your location, an employer may be required to make a contribution to your retirement savings. If this is the case in your area, be sure to check with both government policies and your company to educate yourself on what you should expect. In some areas, employers aren’t required to contribute to your retirement, but will voluntarily match dollar per dollar. That is, if you contribute $6,000 to your retirement, they will contribute an additional $6,000 to your retirement within the same year.
In other areas, employers are required by law to contribute a portion of your salary – out of their pocket – to your retirement. For example, some areas require an employer to contribute up to 9% of your pre-tax income to your retirement. It may be beneficial to live or work in an area with such a rule, as it offers automatic retirement savings without additional effort on your behalf.
2. Making Small Sacrifices For Long-Term Gain
The final ten years prior to retirement are arguably the most crucial. Ramping up your savings by rerouting a rather generous portion of your income into a retirement fund or investment account is an aggressive, but often necessary financial choice. It is also a good idea to pay off the remaining balance on your mortgage in order to drastically slash your monthly expenses in retirement. Little else provides as much peace of mind as knowing that your home is paid that you’ll be safe in times of financial hardship.
If you haven’t saved very much for retirement, yet are soon approaching retirement age, it may be beneficial to seek additional part time employment and funnel the extra income into retirement savings. While this is an extreme measure, it is an effective method to drastically boost retirement savings within a short period of time.
3. Selling Assets For A Cash Windfall And Smart Property Purchasing
Homeowners with substantial equity in their home may choose to sell large residences in favour of a smaller, more affordable property that can meet the needs of a single retiree or a retiring couple. Ideally, the proceeds of the sale will cover the full purchase of the smaller home, and the remaining funds will be transferred into retirement savings. However, trading in a large, expensive property in favour of a home with a more manageable mortgage can also be a smart move.
Business owners that aren’t ready to fully let go of their business can sell a majority share to an investor while remaining a silent partner. This option still allows for receiving monthly or quarterly profits from the business while remaining a vested partner.
Saving for retirement becomes far less of a chore when you are aware of the lifestyle you want and how much income it will take to maintain your desired way of life. Making use of the financial resources that are available to help you save for retirement, along with a firm mindset on pinching the dollars that can be squeezed can result in a sizable retirement savings. Planning and taking action are the two most important ingredients to success when saving for retirement.