Preparing for retirement requires more than merely socking money away into a savings account year after year. Between savings, investments, Social Security and other assets such as real estate, there are plenty of opportunities to create a comprehensive retirement portfolio. However, building momentum toward living the good life in one’s golden years is easier said than done. Let’s take a look at some helpful ways that make it that much easier to prepare for retirement and ultimately get as much as possible out of the good life after departing the workforce.
1. Embrace the Potential to Financially Evolve
There is a common misconception that retirement planning is centered on redirecting a specific amount of money from each paycheck into a savings account or investing account. There is also a misconception that all retirement investing accounts are passively managed as opposed to actively managed.
The truth is retirement saving, investing and planning are dynamic, meaning they change as time progresses. Some investment accounts are actively managed on behalf of clients. Meet with your financial advisor at least once per year, discuss your retirement plan and rebalance your accounts based on economic fluctuations, geopolitical events and other influences as necessary. In some cases, even a slight tinkering in terms of risk tolerance or diversification might make a massive difference in the value of your portfolio across the years ahead.
2. Calculate Anticipated Spending
Though no one has a crystal ball, it is possible to accurately predict one’s level of spending during retirement up to a certain extent. Crunch the numbers, get a sense of how much you are likely to spend in each month of retirement and start planning accordingly. Keep in mind, the cost of living is rising with each passing year as housing becomes more costly and inflation continues to soar so be sure to budget in additional savings for what appears to be quite the costly future.
3. Diversified Investing for Ongoing Growth
Retirement planning is all about the long-term, meaning focusing on a couple hot sectors or stocks at the current moment won’t help you progress toward a timely and rewarding retirement. Diversify your investments, choose growth-oriented ETFs, mutual funds and other investment vehicles and be patient while the economy grows in the years ahead.
4. Expand Your Nest Egg Beyond Stocks
Above all, be sure to diversify across a wide variety of investment vehicles. Stocks are certainly worthy of a position in your overarching portfolio yet they should not be the entirety of your portfolio. You can offset the comparably high risk of stocks with low risk ETFs, money market accounts, CDs, bonds, real estate and even some conservative mutual funds.
5. Take Advantage of all Retirement Investment Perks
If your employer offers 401(k) matching contributions or any other perks related to retirement savings and investing, take full advantage of those opportunities. Max out your annual retirement contributions, capitalize on catch-up contributions when you reach age 50 and older and you’ll make headway in your quest to retire with a sizable financial nest egg
6. Prepare for the Anticipated Cost of Living
The locale you have your sights set on for retirement might not be the same spot that you currently reside in. In other words, your cost of living is likely to increase simply because you likely have designs on living somewhere beautiful and comfortable after retiring. Factor in the cost of living in your chosen retirement locale when planning your financial picture for the future and you’ll have a much more accurate idea of how much it will cost to live comfortably after retiring.
7. Attack Your Debt
If you have any debt, proactively attack it as soon as possible. Downsize your debt as quickly as you can and you’ll spend that much less money on interest that has accumulated while carrying debt. Instead, use the money toward retirement savings and you’ll make headway toward building the financial nest egg you need to live in comfort after departing the workforce. Be mindful of new debt offers as taking on additional debt will only hinder your attempt to retire all the more in the years ahead.
8. Create Emergency Savings
Though you might only have a couple decades left in the workforce, you still need emergency savings. Everyone should have an account that can be liquidated if need be. The ideal amount of money for an emergency savings account covers between three- and six-months’ worth of expenses. However, even if you can’t amass half a year’s worth of savings, simply having a month or two of savings in the bank will provide peace of mind.
9. Plan Your Spending
Most people spend freely during their years in the workforce as there is always another paycheck coming through the pipeline. Now that you are preparing for retirement, it is time to plan your spending to remain within the constraints of a fixed income.
10. Pay Attention to the Long-Term
If you have not yet taken out a long-term care insurance policy, now is the time to consider doing so. The logic in taking out a long-term care insurance policy is to reduce the financial burden in the event that constant care is necessary throughout retirement and you cannot rely on a significant other or another partner for assistance. If you buy a long-term care insurance policy at a comparably young age, you’ll ultimately pay less in the long run.
The long-term of your finances extends beyond insurance policies. If you have not created a will or other estate planning documents, seize the opportunity to do so while you are of sound mind. Prepare for your family’s financial future with a comprehensive will along with other estate planning tools such as a power of attorney and you will rest easy knowing a plan is in place for your hard-earned money should you become incapacitated or pass away sooner than expected. The purchase of long-term care insurance should be considered in the context of your overall financial plan to determine if it makes sense for you.