Retirement is one of the biggest milestones of your life, and the more you plan for it, the more you will get out of it. You have worked decades for the opportunity to live comfortably. How can you be sure that you will be able to afford the retirement you dreamed of? How can you be mindful of spending your time so that you will feel fulfilled?
10 Best Ways to Get Prepared for Retirement
1. Optimize Your 401(k) Accounts
As soon as you can, start contributing as much to your 401(k) accounts as possible. Ideally, you will make the maximum contributions, although this is not financially feasible for everyone. Some taxpayers have the option to open individual IRAs, which can help increase savings.
Educate yourself about the rules you can take advantage of as you get closer to retirement. If you are over 50, you are probably allowed to contribute more to your plan than you could when you were younger. Check to see if there are any catch-up contributions that can benefit you. If you have more than one IRA, find out if you can combine them with one institution and if doing so will make the most of your money.
2. Plan Your Investments So They Keep Growing
Just because you are retired doesn’t mean you can’t benefit from dividends. The average American spends 20 years in retirement, and it is very possible that you will be retired much longer. That is a long time to continue to grow your assets. Make sure that your portfolio is diversified so that it can continue to grow with the market.
The disclaimer here is that any investment carries risk, and diversification does not offer 100% protection from major market downturns. However, history has shown that even through depressions, money in the market does better than money out of the market.
3. Take a Good Look at Your Expenses
Most likely, there are holes in your spending that you can plug. Before you retire, take a good look at your expenses and determine where money can be saved. If you are a good saver, you might well end up with healthier finances than someone who makes more money, but uses it carelessly.
Cut Down on Small Expenses
The best ways to curb your spending don’t involve sacrificing the things you enjoy. Is there an online subscription that you don’t use? Do you still belong to a gym, even though you have been doing most of your workouts on a yoga mat at home? Perhaps if you purchase gourmet coffee to make in your kitchen instead of the grocery store brand, you will enjoy it more than the lattes you frequently buy when you are out and can still save money.
Reduce Big Expenses
As you can see, the little things add up. However, there are also some big changes you can make to reduce your expenses. Most significantly, you might want to consider downsizing your home or moving to a less expensive area.
4. Set a Budget
How can you get your budget prepared for retirement? Most retired people need about 70-90% of the income they had when they were working. The average American spends around $500,000 during their retirement. Once you have reduced your expenses as much as possible, think about your sources of income and set a monthly budget.
Calculate how much you are entitled to in Social Security payments. Usually, it is 40% of what you made when you were working. Consider how much you can expect to make in passive income and how much you will bring in via a part-time job, should you choose to take one.
Utilize educational resources from financial institutions to help you calculate what percentage of your retirement fund you can responsibly withdraw every year, and how this percentage will change as you age. Finally, when you are clear on your income and your expenses, set a monthly budget so that the latter does not exceed the former.
5. Be Especially Careful About Accounting for Healthcare in Your Budget
Many people are not well-informed about how much they will spend in healthcare when they are retired. For the average American senior, that number is around $285,000. Compare that to the average $230,000 it takes to raise a child from age 0 to 18. Make sure you have saved enough to afford this cost, and put off your retirement if necessary.
In the years leading up to retirement, put as much money as you can into your health savings account, if you have one. Research the insurance you will need and add additional coverage as soon as possible. Planning ahead will get you better rates and reduce your chances of being denied.
6. Eliminate As Much Debt As You Can
Try to pay off as much of your debt as you can before retirement. This includes your mortgage, your car payments, and any assets for which you have co-signed. As you get closer to retirement, try to make major purchases using cash instead of credit cards.
7. Make a Contingency Plan for Stock Market Fluctuations
If the stock market takes a downturn leading up to your retirement or after you have retired, don’t panic. Having a flexible spending plan in place can help you through these situations. Consider withdrawing less of your portfolio and taking on a part-time job until the market recovers. When it ultimately does, you can resume your travel plans and all the things you looked forward to knowing that you make prudent financial choices.
8. Set Goals in Different Areas of Your Life
Now that we’ve discussed the financial aspects of preparing for retirement, it’s time to get into the fun stuff! Think about the different areas of your life:
- Fitness
- Social activities
- Travel
- Hobbies and leisure activities
- Volunteer work
- Spirituality
Set some goals in each of these areas. When you continue to challenge yourself and engage with others, you can make this time incredibly meaningful. When it comes to retirement, first dream it: then get out and live it!
9. Find Ways to Give Back to the Community
According to many experts in the field of happiness studies, two of the most important ways humans build a sense of satisfaction are:
- Doing things they are good at
- Contributing to the well-being of others
Your retirement is a great time to use the skills you developed during your working life to make meaningful contributions to your community. Be proactive about finding volunteer opportunities and have fun while you’re at it!
10. Talk With Your Retired Friends
Your retired friends are an excellent resource when you want to feel prepared for retirement. Plan some coffee-dates or invite them as dinner guests and talk about the challenges and joys of retirement. Ask plenty of questions and allow them to help you envision your retired life so that you can prepare yourself for it.
Being Prepared for Retirement Equals Peace of Mind
While there is no measure of a successful or failed retirement, it is true that planning and taking the steps you need to get prepared can set you up to be more comfortable and achieve more of your goals after you stop working. To learn more about how to prepare effectively for your retirement, and for other news relevant to senior living, visit Senior Life News today.
