Retirement seems like something that’s a long way off – until it suddenly arrives.
Think about that vacation you booked two years in advance. It seemed like it would never happen – then BAM, you were on the plane, heading to Hawaii.
That’s a bit like retirement. The decades fly by, and the next thing you know, you’ve hit retirement age.
And you’re not prepared.
“Surely I don’t have to prepare for retirement?” you’re thinking. “Isn’t the whole point of retiring to sit back, put my feet up, and do nothing?”
Of course – but to do nothing, you have to have the right financial plans in place that will allow for that sort of luxury.
If you’re planning to retire within the next 10 years, you need to take the following steps:
Step 1: Take Advantage Of Retirement Accounts
If you’re in the position to do so, now is your time to contribute the maximum allowed in your 401(k) or IRAs. With your 401(k), you’re looking to get the maximum matching contribution from your employer. You might also want to consolidate your accounts, if you have multiple, to simplify management and to give you a clearer picture of how much money you’re dealing with.
Step 2: Calculate Your Retirement Income
Structure is one of the most important things if you want to stay financially stable during your retirement. Based on the money you expect to save before retiring, make a plan of your retirement income, factoring in a monthly spend, a yearly vacation cost, and an emergency fund for medical bills.
Step 3: Consider Supplementary Medical Coverage
Being over 65 has certain advantages when it comes to medical insurance: Medicare should cover pretty much any routine healthcare cost you have. But as you age, you’re more likely to divert from those routine costs, and that’s where you’ll benefit from supplementary medical coverage. Preparing for your long-term healthcare costs, which Medicare doesn’t cover, is absolutely essential.
Step 4: Diversify Your Investments
There are so many more ways to invest for retirement than simply setting up an IRA or similar. Consider stocks, bonds, real estate, and other mutual funds – and don’t be afraid of the stock market, either. Having a diverse investment portfolio can help you to generate some serious retirement income.
Step 5: Reduce Your Debt
If you’re currently paying high-interest debt, you’re at a serious financial disadvantage. The faster you can pay off that debt, the better. It’s better to pay with cash or debit for big purchases, too, to limit any new debt.
Step 6: Estimate Your Expenses
Just as you should calculate your retirement income, you should also estimate your expenses. Some expenses can be planned and budgeted for, such as your weekly food shop. Others, such as a spontaneous vacation or a medical bill, may be less expected. It’s wise to assess your current lifestyle and consider how to cut down on your current expenses by the time you retire, if necessary.
Step 7: Consider Where You’ll Live
When planning your income and expenses for retirement, you should think about where you plan to live. Perhaps your expenses are currently higher because you live in an expensive location. If you plan to downsize into an apartment in a low-tax state, your expenses will be far lower. But perhaps you wish to spend some of your savings on a larger home to live out your retirement dream, and in that case, your expenses may be higher.
Remember, the earlier you can start planning for retirement, the better.
If you’re within 10 years of retiring, now’s your time to start setting goals. But if retirement is fast approaching for you, it’s never too late to get a plan in place, either! Simply follow the above steps and you’ll be much better prepared for when the time comes.
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