HOW TO PUT YOURSELF ON FIRM FINANCIAL FOOTING AS YOU APPROACH RETIREMENT
In your 20’s, 30’s, and 40’s retirement can seem like it’s a lifetime away, but as you reach your 50’s it begins to feel much more pressing. If you are finding yourself approaching fifty and you’re not where you want to be with your retirement savings, don’t despair. It’s not too late to take steps to get yourself back on track.
Below are four areas for you to consider focusing on as you enter into your 50’s and begin buckling down on your retirement planning strategy.
Practice Control with Your Spending
Though it might not be the most exciting or fun step to take, controlling your spending is crucial in saving for retirement. The math is simple: the less money you spend, the more money you save. Not only will trimming down your lifestyle expenses help you save more for retirement, but it will cost less to maintain the standard of living you’re used to once you finally do retire.
One way to get a solid handle on your spending habits is to sit down and budget out how much money you think you’ll need in retirement. This retirement budget worksheet can be a great resource. Make sure you factor in health care costs, especially if you plan on retiring before 65 when Medicare becomes available to you.
Tackle Your Debt
Ideally, the best way to walk into retirement is without bringing along any debt. You can end up shaving thousands of dollars a month off of your retirement expenses if you’re able to pay off your mortgage, in particular before you retire. To do this, begin making extra principal payments each month in your fifties, as much as you can afford to add to your payments, and then refinance the smaller balance so that your new monthly payments will be more retirement friendly. Of course, if you have other debts with higher interest rates, focus on paying those first and then turn your attention to your mortgage. Another option is if you happen to find yourself in a larger home with space you don’t need, consider selling your house and moving into a smaller, more affordable home.
Downsizing will not only significantly reduce your mortgage payments, it might even eliminate them depending on your situation. Additionally, you’ll end up having to pay less on property taxes and home insurance if you downsize.
Focus on Your Career
For most of us, having a stable income is our greatest asset, so be careful not to let go of that too quickly. Finding a job that you love to do, or that isn’t too taxing on your mental and physical health, can mean working longer into retirement. Of course, this move gives you more time to get on solid financial footing. For instance, if you work longer, you will ultimately get a higher rate of Social Security benefits, since you’ll be continuing to pay into your Social Security.
With life expectancies on the rise, you should expect to live into your 80’s or 90’s, so if you want to retire younger, like in your 50’s, you’re going to have to be prepared to support yourself financially for 35–40 years. And, with most retirement plans, you’ll have to pay a tax penalty if you try to access those funds before the age of 59 ½. So, look for hobbies or skills you enjoy engaging in that you could profit off of in some way for a little extra income to help you stay afloat.
Begin Investing and Saving Seriously
The best way to be sure that you’ll have money to support your needs in retirement is to save and invest your money in a serious and focused manner. Build a portfolio, minimize your risk, and invest in ways that are appropriate for your lifestyle and goals.
Make sure to do your proper research and meet with a financial advisor so that your portfolio isn’t opening you up to an unnecessary level of risk. These investments are supposed to be reliable for you, not huge question marks in your financial foundation. Since one can never be sure how safe their investments are going to be, your best option is to create a diverse mix of investments with an appropriate level of risk for your assets.
Ultimately, the best way to tackle retirement planning, and these steps listed is to educate yourself. We make our best decisions when we’re coming from an informed place. So, research different retirement accounts and the ways they change as you reach certain ages. Sit down and look into what it means to build a portfolio and how to do so safely. Study different budgeting ideas to see which methods will work best for you.
While there are plenty of resources available to you online and in books, meeting with a professional advisor who can get to know you can help you make a retirement plan that’s perfectly suited to your personal goals and retirement dreams. If you’d like to have a conversation with one of our professional financial advisors, please reach out to schedule a discovery call today.