Retirement looks a lot different than it used to. Pensions are dwindling, some work part-time while “retired,” and others have to rely on family to get them through their golden years. It’s not all bad these days though as some are able to retire early. It takes a lot of hard work, but there are ways to stop working years before retirement age. Given how the economies and the society changed with the pandemic, the future seems even more uncertain now than ever. With this level of uncertainty, you may feel like you are already late to the party. If you haven’t already started, our credit counseling advice is to start considering suitable retirement strategies.
Retirement Strategies – Why is it so Crucial?
No matter how old you are your financial obligations will always go hand in hand. Therefore, you have so many important financial decisions to make. How will you alter your lifestyle from how you live now? Living a financially healthy life in retirement is challenging. However, if you start planning later than you are ideally supposed to, then it can be even more challenging. So, where should you start? Prior to laying out your retirement strategies make sure you have your background information in order. The following list of things is probably a good place to start.
- Your legal documents – Are they all in place in reparation for retirement. ACCC’s legal documents resource page can provide you more information on this area.
- Are you knowledgeable about your medical insurance and benefits? Visit our medical insurance resource page for more information.
- How prepared are you financially for retirement? Visit our retirement calculators for more information.
- Are you saving enough? Visit our savings tips page for more information.
What You Need for a Stress-free Retirement
It is essential that consumers plan for retirement and take steps now to help them achieve financial stability for that period of their lives. Although consumers should ideally start setting money aside early in their careers, individuals who are late to the game still have a chance to save enough for a comfortable retirement.
The more time consumers put off saving for retirement, the less time they have for their savings to grow. The good news is that even if you’re late to the game, it is still possible to build a comfortable retirement fund.
Retirement Strategies for Late Comers:
- Have a realistic target – One of the reasons consumers are unprepared for retirement is not having a realistic estimate of how much money is needed to live comfortably during those years. Having a financial target will help consumers figure out a retirement savings plan. Consumers can use this plan to figure out how much money they need to save each month to reach their desired goal.
- Take advantage of tax breaks – Consumers can benefit from tax-deferred accounts. If consumers do not have access to a 401(k) offered by employers, they should consider opening an individual retirement account (IRA). Having these accounts will allow consumers to save the income tax on anything that they put into the account.
- Know your limits – Each type of retirement account has different limits on how much money consumers can contribute to them per year. Consumers should know the guidelines set by the IRS to ensure that they are taking full advantage of their plan.
- Catch-up contributions – Catch-up contributions allow consumers that are over 50 years old to add more than the standard contribution limit to their retirement funds, depending on the type of account that they hold. Consumers should check their eligibility for an opportunity to save additional amounts.
- Start minimizing expenses – Consumers should start cutting costs in order to increase savings. Those extra savings can give consumers more financial freedom during their retirement. Consumers should take a look at their monthly spending and see where they can cut back.
- Talk to a financial advisor – It might be helpful for consumers to speak to a financial advisor. Financial advisors can help late starters develop an effective retirement plan.
How to Retire Early From Work
Regardless of your age, it is never too early to start thinking about life after work.
Many consumers underestimate how much savings is needed to get by once they retire. More often than not it is much more than they first realize. Life has numerous financial obligations to fill and retirement often falls at the end of the list. It doesn’t seem so urgent at first. However, as time goes by you tend to wonder if you are too late to start the process. It can be challenging to focus on retirement when you have other obligations such as debt management, child care, housing, credit card debt, etc. If you are living paycheck to paycheck or have been laid off or struggling to keep up your business ventures, it makes it even more difficult.
Therefore it is important for consumers to figure out their retirement goals. First, they should decide the age at which they plan to retire, where they would like to retire, and if they plan on downsizing or staying put. All of this information can be a blur at first. However, a ballpark idea of this information is a must if you are looking at successful retirement strategies. Once you have figured out how much money you will need to achieve your retirement goals, use a retirement calculator to figure out if you will have enough to retire. Your focus should be on what you should really do to save more aiming for a stress-free retirement.
How to Save for Retirement on a Budget
- Adjust your budget as life priorities change. A Household Budgeting Worksheet can help you stay organized and track your expenses.
- Start saving now. Savings add up no matter how big or small. Make sure to start saving as much as you are able to, as early as possible.
- Pay off all debt. Carrying debt into retirement will cause monthly bills – and interest – to pile up, which will drain your savings. Develop a plan that enables you to pay off debt before you retire so that you can use savings on other necessities, such as food, medical care, and housing.
- Track your spending. Knowing exactly where your money goes every month will allow you to set some funds aside for your future goals, such as retirement.
- Cut unnecessary spending. Reduce spending money on things you do not need without feeling deprived. Start with something simple, like bringing your lunch to work rather than eating out every day.
- Check your retirement plan at your workplace. Some 401k plans include benefits, such as direct deposit from your paycheck, which can automate the retirement saving process.
- Set up automatic transfers from your checking to your savings account. With each paycheck you receive, make sure a percentage goes into your savings account dedicated to your retirement funds.
A successful retirement depends on the level of planning, commitment, and the quality of the goals you set for your life. The financial discipline you have as a young individual will help you smooth sail into retirement. The other thing you need to consider is the social and economic changes that are largely taking place in the world around you. Keeping an open mind about housing, being informed about how medical insurance and health care systems are changing is crucial. Being informed and up to date about such issues can help you alter your plan and prepare for the uncertainties in the future. In the end, this is still a plan. Make adjustments to your budget, financial behaviors, and make a flexible plan to successfully live your stress-free golden years.
If you’re struggling to pay off debt, ACCC may be able to help. Schedule a free credit counseling session with us today!