When you’re in your 20s, retirement is a distant concern. When you get to your 40s and into your 50s, getting ready for retirement is no longer something you can ignore. And once you hit 60, you have to have a plan for financing your lifestyle once you’ve left the workforce.
In my 20s, I had a habit of cashing out each 401k when I left a job. I took the tax penalties, but hey, a couple of thousand dollars in my pocket didn’t feel like any sacrifices had been made.
Except when I hit my early 30s, I had no dedicated retirement savings. The average age of retirement is between 62 and 66, when individuals become eligible for social security benefits, so while I still had some time to figure out how to get ready for retirement in my later years, I lost a decade of potential savings and growth.
You would think that if you are contributing to your 401(k), you are keeping up with your retirement planning and the luxury of dodging tax may even engulf you in a delusion of grandeur. However, putting your money in 401(k) and sitting back may not be the wisest thing to do, YES! Reality Check Folks.
Read more: Here’s your 10 Minute Guide to a Worry-Free Retirement
You never really inquire into your 401(k); how your portfolio is balanced, are you paying high fees which could be omitted or is your investment properly optimized and is in sync with your retirement planning, the answer is NO. Well, If you have been ignorant of your 401(k) so far, Blooom can help you gain control.
Blooom is an SEC-registered venture advisory firm, which optimizes and monitors your 401(k). It gives you the first checkup for free where it will give you an insight into your account like how stocks and bonds are balanced against each other, what extra charges you could get rid off and other stuff.
You don’t have to delve into the intricacies of investing, just leave your 401(k) affairs to Blooom and it will align your investments according to the age you wish to retire at.
I may not have noticed if not for circumstances of family members that weren’t as fortunate to recognize this predicament early on. In their late 50s and 60s, my aunts had to move in together after over thirty years of work because they didn’t have adequate finances to get them through their later years. While they’re solving their situation in prudent ways, you can start combatting the problems that beset retired folks by starting your retirement planning as early as possible. Whether you are retiring in 5 to 10 years or 20, use these strategies when getting ready for retirement to make sure you are prepared.
1. Visualize Your Retirement
No two people’s visions of retirement will be the same; for some, a life of leisure in the sun may be a dream, while for others, having time to give back to the community is most important. If you’re early on in planning for your retirement, your vision may change over the years, which means you’ll need to adjust your retirement planning strategies.
But if you’re a decade or less from retiring, you probably have a better idea of how you’d like to spend those years. Start figuring out your ideal retirement scenario by making a “getting ready for retirement checklist,” and begin by listing your goals and what you hope to do, in as much detail as possible:
- If you want to travel, list the places you want to go to and the type of experiences you want to have.
- If you want to do work part-time, make a list of the job styles and work conditions that you want before you even think about income numbers.
- If you want to relocate, describe the features and some ideal places that you might be interested in.
2. Get Practical With Your Goals
Once you have a list of ideals, start culling them down with practicality in mind. Yes, living on a secluded beach in Bali sounds appealing, but how will you get there and what will you do? If your grandkids live around the world, how often will you get to see them? From there, you can come up with alternatives that still give you what you want in retirement, such as considering a few hours flight to Florida over a cross-oceanic relocation to Fiji.
3. Figure Out Your Work Options
The same goes for work. A 2016 Pew research study found that 18.8% of Americans over the age of 65 Americans choose to or have to work in order to make ends meet. You may want to keep working to find a way to fill your days or because you need that extra income for expenses, but that doesn’t mean you need to sacrifice your goals. With freelance jobs available at all times of the day, you can find jobs to take on when your time allows it, from the comfort of anywhere.
4. Survey Your Assets
The next step in your getting ready for retirement checklist is to figure out what assets you have, no matter what stage of retirement planning you are in. But in this case, your assets will mean more than just the financial worth of what you have physically.
Start by making a list of your financials:
- How much do you earn each month?
- How much is in your checking account(s)?
- How much is in your saving account(s)?
- How much is in your retirement account?
This list will help you come up with a rough figure of how much you earn now to support your current lifestyle, and what available funds you have to cover that.
But what about your guitar playing? Sure, you only jam with friends here and there these days, but perhaps teaching others to play guitar could help you bring in some more money while practicing your craft. Make a list of your hobbies, skills, and specialized knowledge with some ideas for how they could be turned into income.
5. Make A Budget
You figured out how much you need now to live, so do the same for your future. To craft a budget, factor in:
- Income (from projected work and benefits)
- The debt you’ll hold in retirement years
- The cost of your goals
The more ambitious your goals for retirement are, the more you’ll need to save. Find ways to save money every day by cutting expenses; it will help with your spending later on and gives you extra funds for retirement savings. Make it a point to target your debt before retirement approaches so you don’t have to worry about payments and interest when you should be enjoying yourself.
6. Time Social Security Right
Social Security benefits can be a lifeline for many retires, and it’s well due after a lifetime of contributions. However, you’ll have to decide when you start getting your Social Security, and in this case, waiting can be to your benefit.
You can claim your retirement starting at the age of 62 or you can wait until your “full retirement” age, which is based on the year you were born. However, you won’t get the full benefit amount if you retire before that age. For example, someone born in 1960 will reach full retirement age by 67. If that person retires at age 62, they will only get 70% of the total benefit amount, but if they wait five years, they’ll get the full 100%.
When creating your retirement plan, try and set your ideal retirement age at the age you will be able to receive 100% of your owed Social Security to maximize your income during those years.
7. More Than The Money: Keys To A Healthy Retirement
How to get ready for retirement beyond just considering the financial needs? Start taking an active interest in your health. Health problems will escalate in later years, and medical debt can set your plans back. No matter how old you are, have regular checkups for both your body and your teeth to identify problems before they progress, and commit to living a healthier lifestyle.
Another major concern of retirees is isolation and depression. Friends move away or pass away, and with no kids left to raise or work left to do, many retirees can feel as though they lack direction. Planning for retirement has to include concern about social needs – where will you go, who can you see – and staying mentally engaged, whether by reading books or playing puzzles with the grandkids. With social media, you now have the option to join groups of like-minded people from all over the world and to stay in touch with friends and family easily.
Getting ready for retirement should be something you think about, no matter your current age. Investing in your future self will help you enjoy your later years on your terms, without needing to worry about getting by.
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