Most people of working age look forward to retirement as the time when they can put away their work clothes for good and do what they want with their lives. This might be as mundane as spending more time with their loved ones or as exotic as heading off to warmer climes in search of a new life in the topics!
However, whatever your plan might be, there are several things you must keep in mind to ensure you can actually achieve your retirement goals. This post will explore a few of the primary factors you should understand if you are to not simply have enough to live off but enough to enjoy your life after work.
Assess Your Financial Situation Thoroughly
Before you can even begin to contemplate what your retirement will look like, you need to spend time assessing your current financial situation and exploring how you will fund your retirement plan. This will vary per country, but in almost all cases, you should take the time to figure out the money aspect of things. Fortunately, this is not as difficult as it may initially seem, especially considering the abundance of resources available online to assist you in obtaining hard numbers.
By utilizing options like an online retirement calculator, government resources, and perhaps even the services of a qualified accountant, you will get a far better picture of your current circumstances and what you need to do to make your retirement dreams a reality. Understanding your current situation is the first step toward making better decisions that will have a tangible impact on the quality of your later years.
Plan For Retirement Expenses Carefully
Regardless of how much money you think you have squirreled away in your Roth IRA, you will still be shocked at how costly living can be…particularly when you don’t have any more sources of income (more on that later). In some cases where you own your own home and are in good health, this won’t be too much of an issue, but if you have been unable to get on the property ladder, you will need to factor in (inflation-adjusted) costs like rent.
If you own a home, retiring will not eliminate your housing costs. Furthermore, you may be spending more money since you will be spending more time at home since you will no longer be working.
Consider Health Care Expenses
Although somewhat related to the previous point, it deserves its own section due to the costs involved and the fact that you will require more medical attention the older you get. Therefore, you must factor into your sums the amount your health insurance might rise and what you will do to cover them. You may also have to cover the cost of things like prescription drugs and other medical supplies, even if you happen to live in a country with universal healthcare.
Determine Your Retirement Income Sources
Just because you have finally hung your hat up and clocked off from the great treadmill doesn’t mean you need to be entirely bereft of income. As long as you have been smart with your money, you could find yourself earning money from all sorts of sources. One of the best ways to keep yourself living in the standard you are used to is via dividend-paying stocks. If you have a decent nest egg, you can invest it into stocks that pay out a certain percentage of their earning at specified intervals.
If you are worried about picking the wrong stocks, you can always make use of dividend ETFs such as SCHD or one of the newer but potentially more lucrative options (that make use of options) like JEPI. Just bear in mind that you could end up getting paid quarterly, so you will need to budget around intervals you might not be used to.
Manage Taxes To Your Advantage
You can take advantage of several tax-beneficial retirement mechanisms in your younger years to ensure that your nest egg grows without Uncle Sam getting his hands on it too early. For example, with a Roth IRA, you can put away money for retirement without having to pay taxes on it right away. The fundamental advantage of a Roth IRA is that, after the account has been open for at least five years, donations and gains on those contributions grow tax-free and can be withdrawn tax-free after 59 years old.
Evaluate Your Retirement Goals
Finally, it is utterly imperative that you have a keen understanding of what you want your retirement to look like. This doesn’t mean planning everything down to the day, but it does mean knowing how you want to live, if you want to travel, whether your health will be a big or small factor, and so on. Once you have an image of how you want to live and how much it might cost, you can begin the process of saving the right amount in order to afford this way of life.
When it comes to retirement, a little planning can go a seriously long way. By recognizing where you currently stand and what you want your later years to look like, you can devise a plan that will help you live as you have become accustomed to and enjoy the rest of your life without worrying about money.