We can spend months or even a year preparing for a one-week vacation, but too many people don’t put that much time in preparing for their retirement. That’s despite the fact that the average person spends around 20 years of their retired life. Because retirement rarely ever comes as a surprise, it’s a stage in life we can get ready for 10 years in advance or even more. By doing so, we can retire with comfort and security.
To be able to retire successfully, you’ll need to prepare financially, physically and emotionally. The earlier you start, the more likely your planning will pay off when the time comes.
This read will help you get ready and enjoy your golden years without a worry.
Ideally, you can start saving as early as your 20s. One way can be through compound interests; you receive interest on the money invested and its interest as it compounds gradually. The easiest starting point is to contribute to your 401 (k) plan at your work.
This is a retirement savings account that you are not taxed on until you start to withdraw from it. The gains you make one year will produce itself the next year. To put things in perspective for you, let’s have a look at how much you’ll be saving by putting aside $250 every month:
- At 25: You will have saved $878, 570 by the time you’re 65.
- At 35: You will have saved $375,073 by 65.
- At 45: You will have saved $148,236 by 65.
Huge difference, right!? That’s an example of money compounding. The more you save, as you get older, and as long as your salary increases, the better for you.
Educate yourself on the different types of investments that can provide a steady retirement income. For instance, you could sign up for immediate annuities, which are insurance products that give you a stream of income in exchange for a lump of money.
Bonds are another investment that produces a regular interest income. Different types of investments will have their own pros and cons, so look into them carefully to see which suits you the best.
When you’re young, rarely getting sick, and perhaps tight on money, having a healthcare plan in place hardly seems practical or necessary. But as you age the need for medical care increases and so do medical costs. You will find it very difficult to pay for medical bills, and lots of emergencies can put you in a very tight spot, if not bankrupt you.
You are eligible to register for Medicare benefits by age 65, but it might not be enough. Fortunately for seniors, they can seek out other health care plans like Medicare Supplement, Medicare Advantage and Senior Dental Part D. You will directly be signed up for Medicare parts A and B if you are a person that is currently getting Social Security. Part A covers hospitalization, while Part B covers doctor fees. But in all likelihood, you will need more than your Social Security paycheck to continue to live a healthy life.
There’s nothing to stop you from investing further during retirement. However, to do that you’ll need to get out and stay out of all debts. Get all your debts paid off before you reach retirement, because any debt will drain your retirement fund. While your income will provide you with a stable and comfortable retirement, it won’t be enough to stave off debt payments as well.
Most people will tell you retirement is the time when you get to do the things you couldn’t do before you were bogged down by work and other responsibilities. Often those things you’ve been saving for when you retire aren’t so cheap; be it travel or picking up a new hobby. You typically need 70% to 90% of your pre-retirement income in order to maintain a good standard of living.
Relocating to a cheaper area can not only save you money, but possibly even be more enjoyable than your current location. If you live in an expensive state, you might consider downsizing your residential place, or move to another less expensive state.
It’s never too early to start your retirement plan. Even if you fall behind on it, it’s never too late to catch up. But the later you start, the bigger strides you’ll have to take to catch up. By the time you reach your 50s, there will be some actions that you have to take. So, it’s best to familiarize yourself with what you’ll need to do ahead of time.