They say that a little preparation and homework can save you a lot of hassle at the end of the day, and when it comes to setting up yourself for retirement you really need to plan ahead in order to provide for yourself and your family. While things have changed drastically since our parents and grandparents retired, if plan ahead and make smart choices with your money, you will be able to provide yourself with a solid foundation to rest on as you get older.
Your situation will be unique to you for many reasons, however right now you need to think about your retirement, what you want to do, how luxurious do you plan for it to be, and prepare for the cost of that to be much higher than you expect.
How to Handle Uncertainty
You can’t make any guarantee for the future. From health issues to natural disasters, economic hardships and other unplanned situations, life can and will often throw you a few curve balls from time to time. These obstacles are inevitable, and the best-laid plans are those that help you prepare for the uncertainty.
It goes back to the old saying “Don’t put all of your eggs in one basket” and you need to take the time to look at the various factors in your retirement plan and ask yourself “How can this go wrong?” and if so “How am I going to handle this?”. Approach your situation with a critical, worst case scenario attitude and be realistic about setting up a backup plan, just in case. Chances are that you might not need it, but in asking yourself a few serious questions you will give yourself a long-term peace of mind.
While you might think that your 401K plan will cover everything, what happens if you lose your job and have to withdraw money from it early? Will you be able to recover from it? How will you handle things if you or your spouse needs more medical care than your insurance covers? You probably don’t want to think about these sort of things, but you must if you want to have peace of mind for your future.
Whatever situation you’re in, you need to give yourself a few options so that you aren’t left stranded and alone.
Planning for Financial Independence
The traditional idea of retiring at 65 and getting a gold watch and a pension is no longer the case, and retirement is now a matter of being financially independent. Many people are surprised when they find themselves not retired early, not at 65, but still working, even into their 70’s.
There is no magic number, and each person needs to take an honest look at what kind of quality of life they expect to have and how much it’s going to cost over the long run. In the past people could rely on pensions, but now companies widely use 401K’s, which put most of the financial burden on you. While these programs can appear confusing you may find that you can make them work to your benefit.
You need to take an honest look at your yearly income and expenses and then try to account for things such as inflation and the steady rise in housing prices across the country. Many people fail to account for the fact that, due to the growth in modern medicine, they’re likely going to live much longer than they originally thought. Worldwide people are living longer and more active lives and while you might plan on living to 85, what are you going to do when live to see 105? How are you going to budget for an additional 20 years?
You might also want to consider that you’ll be living differently when you retire. Chances are you’ll find yourself in a big, empty home with your kids moved out, and in your older age it may stop being cozy and start being a chore, so perhaps you’ll want to downsize, or maybe even get an RV and do some traveling.
The sooner you do this the better; it’s never too early to start planning, saving and investing in your future. Take some time, maybe even a few days, to really figure out what these costs may add up to, and how long it would take for you to save up that amount. Chances are you’ll have to make some compromises now so that you won’t have to later on.
What is a 401K?
A 401K is more or less a retirement plan where money is taken out of your paycheck prior to taxes being taken out. As of 2017 you’re not able to put up to $18,000 into the fund without being taxed on it. While some employers will match you in some way, others may not.
It may sound confusing, but it can be explained like this. Let’s say you make $60,000 per year and you put in $10,000 per year to your 401 K. This means that when you file your taxes, you would only be taxed on $50,000 per year. You’ll be saving money on the taxes, as well as putting that $10,000 safely away.
Each company is different, so be sure to dig deep and see what exactly your employer offers you. Many people miss opportunities because they’ve failed to read the fine print.
What does Social Security mean in Retirement?
Signed into law in 1935 by President Roosevelt, Social Security is provided to ensure the elderly never have to live in poverty. It’s a very simple concept, like with a 401 K, a percent of your check is deducted and when you retire you are able to start collecting benefits. Thing is, it’s not enough to live off of on its own. It’s been through many changes, and should only be viewed as supplementary at most. While you can start receiving benefits prior to age 65, there are a lot of pro’s and con’s in doing such and you really need to do your research prior to taking action with this.
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Why do I need Medicare?
Medicare is a government funded health insurance that cares for those 65 and older, as well as those with certain health conditions. The program only covers about half of what is needed, so the rest must be covered out of pocket or by another insurance agency.
Just as with Social Security, it’s a great program but is by no means something you should rely on completely. As we get older, health issues often increase and you don’t want to be caught having to pay a hefty chunk of your yearly budget because of an unexpected injury or illness.
Should You join a Retirement Community?
The common goal that most people have is to have their house paid off completely by the time they retire, and while this is a great idea let’s not forget about taxes, utilities, maintenance, insurance and other costs associated with owning a home, and often these can add up to as much if not more than your house payments.
When planning your retirement you might want to look into the option of either selling or even renting your property and moving into something smaller with less overhead and expenses. For now that big two story house would be perfect, but what about down the road when you’re older, struggling with stairs, and the kids are all long gone?
You might find yourself needing to join an assisted living community. Especially considering current technology, these places have become a great place for seniors to live with peace of mind and friendly neighbors. This option isn’t for everyone, but you should still look into it.
How does Healthcare Affect my Retirement?
At some point, your body will break and it’s up to you to make the most of it while you have it. If you turn on the news, you will hear constant headlines about the state of our healthcare system, and in this situation you really have to make sure that you are covered. If you don’t have that extra insurance then you’ll find yourself paying hundreds out of pocket just for routine doctor visits, even if you have medicare.
You’ll need to do careful research to find just the right insurance policy for when you retire.
Staying fit in Retirement
Once you feel like you’ve got your money and your housing situation sorted you’ll have to face the facts if you’ve been letting those extra pounds pile up. If you don’t keep those pounds in check then you’ll only be hurting yourself, and ensuring that rather than being out and living your life you’ll be sat in a chair, watching others have fun.
You’ll find that even just walking for a mile every day will dramatically drop your risk for type two diabetes, heart disease, and high blood pressure.
It’s never too early or too late to start taking a few simple steps that will have some major long term payoffs in terms of your health and quality of life. You’ll only be protecting yourself by taking care of any potential problems now, because if you wait and they start to add up you’ll find it only becomes more difficult and expensive to fix them later.
Why Senior Citizens need Wills
While this might be a rather scary topic, it’s best to spend an afternoon with a lawyer to make sure that when the inevitable happens, your spouse and family will be covered and that your last wishes are carried out. A legal will is meant to give you peace of mind, and spare your family some of the confusion and problems that will inevitably come when you pass. They are not hard to file, aren’t expensive, and they ensure that your assets will be properly managed. Without a will, the state will often take control of your estate and this is not something that you want to have happen.
Be Confident in Your Retirement
When you retire you can be prepared, and that preparation will mean that you can go about your days having fun, seeing the world, and being yourself. You’ll have to start planning now though, to ensure you get that happy future.
Everyone is unique, both in what they want and what they’ll have the day they retire, so it’s best not to take chances.
View your money as a tool and find a way that you can make the most of it through your employer, investments or other means. Yes you’ll likely have to make some sacrifices right now, but would you rather save up and retire at 50, or buy those things you want and retire at 75?
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