Retirement is one of those stages in life that everyone looks forward to. No waking up early to head to work, no boss, and no need to worry about pesky work/life balance. Though exciting, retirement isn’t just something you can walk into. Preparing yourself financially is crucial, especially if you’re looking to retire stress-free.
Keep reading to learn 5 ways to prepare for retirement.
- Sharpen Your Focus
After putting money towards a retirement fund for decades, you may assume that you have plenty to cover your lifestyle needs and expenses. It’s crucial to take a close look at your retirement accounts and determine if you’ve saved enough to live comfortably. If you could stand to put more money away, work on that goal immediately. No matter if it’s contributing more to your retirement account, adjusting your budget, or putting more money into a savings account, the key to a happy retirement is to ensure you’re financially prepared.
Don’t forget about catch-up contributions that allow you to increase your retirement savings. With catch-up contributions, you can put another $6,000 into a 401(k) account as well as an additional $1,000 in your IRA. While you may have to live more frugally than you want to, the extra money will come in handy once you’re retired.
- Crunch Numbers
Do you know how much money you’ll make in retirement? Knowing your predictable income such as money from your employer’s pension and Social Security will help paint a clearer picture of your financial needs. From there you’ll want to look at your investment, savings, and retirement accounts. To ensure that your assets last throughout your retirement, estimate that you’ll spend about 4% of your portfolio each year.
If you find that your portfolio doesn’t offer enough to support the type of retirement that you envision, you may want to consider contributing more to your retirement accounts or setting more money aside. Working part-time after retiring can also help to make living your retirement lifestyle much less of a burden.
- Prepare to Upgrade & Sell
Unless you already live in a retiree-friendly state, chances are you’ve planned for years to pack up and move once you enter retirement. Moving to a place with low taxes, warm weather, and good affordability are all part of living the life of a retiree. States like Delaware, Nevada, and Tennessee are all popular retirement spot.
Before you can start your relocation adventure, you’ll likely first want to sell your home. If you’ve lived in your house for years now, chances are it could stand some upgrades. Today’s buyers are all about modern appliances, open floor plans, and an overall sleek and clean look.
So how can you pay for these expenses without draining your retirement savings? The good news is that there are all sorts of loans you can take out to finance home repairs, including personal loans for homeowners. You could also consider taking out a home equity loan to fund the expenses. While upgrading your home won’t be cheap, wise renovations will increase your home’s value. This means you can sell your home for more and potentially make enough money on the sale to pay off the loan used for renovations.
- Plan For Your Needs
There are all sorts of considerations you’ll need to make before stepping into retirement. Do you want to downsize to save money on housing costs? Will you need a part-time job to live comfortably? Is Social Security enough to help offset the costs of not working? How do you plan to manage your healthcare costs?
You’ll need to answer these questions and many more during your retirement planning. Retirement isn’t cheap, but if you plan for it, you can live quite comfortably.
- Learn About Social Security
Most retirees embrace the financial assistance that Social Security offers. Knowing the best time to start collecting is important, so that you can ensure you get the right amount of money for the rest of your life. The longer you delay collecting Social Security, the higher your monthly check will be.
People born 1943-1954 can collect full retirement at the age of 66 and Social Security can be collected at 62. The drawback is that by collecting at the age of 62, you’re only guaranteed 75% of your total Social Security amount. Collecting at 65 will get you 93% of your total.
For those born after 1943, there’s an 8% bonus for each year collection is delayed. This could mean hundreds of more dollars if you’re able to delay receiving Social Security.
While this is one of the most boring topics of retiring, it’s quite important to understand the ins and outs of Social Security and how when you collect impacts how much you get.
A successful retirement is one that has been planned for years. If you’re nearing your retirement age within the next 5-10 years, it never hurts to start planning now. Keep these 5 tips in mind to ensure you’re fully prepared.