Are you happy with your finances at this moment?
Who doesn’t want a wonderful retirement? And if it comes together with a decent amount of money in the bank account, it’s even better, right?
We know this may sound scary, especially if you don’t have the necessary amount of funds. And in these times, we have to take into consideration inflation as well.
Think about it this way: you won’t have a daily job anymore, so you have to rely on a fixed income.
That means your stable finances are gone. It’s more than crucial to be fully prepared before you retire but also to make room for the unexpected. We will give you some advice regarding this matter in order to have some golden years ahead.
1. Have a stash of cash and bonds
Usually, financial advisors say to their clients that they should keep one to three years of cash in the bank and an additional three to five years of investments in bonds to cover all their living expenses. It has been proven that this kind of strategy provides some peace of mind for retirees.
How often do you think about your finances? Are you afraid of the future?
This strategy works pretty well because if the stock market is trending upward, a person with 5 to 10 years of living expenses in cash and bonds will cover their expenses but also invest in their investment portfolio.
2. Sacrifice current consumption for future comfort
It can be easy to spend a lot of money. And one strategy that is for sure the wisest of them all is to stave off some of our consumption and start saving as soon as possible. We always think about a later saving just because “there is time”.
But it’s not always like that. Retirement is knocking at the door, and you might not have saved as much as you needed. Then, there comes the panic! Even if the savings are modest, start as early as possible. It’s actually a good habit to get into and can significantly grow your retirement finances.
Falling into spending too much can trap anyone’s chances of making it through retirement. It may be hard to let go of some things you used to like. But take a moment and think about the future. If you are a bit restrained in your younger years, your future older self will thank you for this.
Make a habit out of writing down every expense you have. Take a few fewer vacations, and most importantly, don’t go above the budget.
3. Prepare for the impact of inflation
This is a serious matter, especially with the situation going on this year. Inflation can damage a financial plan that relies on a fixed income. If you are somehow forced to save all your retirement income and you can’t reinvest any of it, then it will be a problem.
Of course, inflation will consume your purchasing power over time, and this will only make your dollars worth even less. Social Security actually raised its payouts in response to rising prices, but that won’t cover the standard of living.
Protect your finances by thinking ahead to the issue. Build a financial plan that has some growth assets in it so it can help your income because you won’t make the same amount of money you did 10 years ago.
Just make sure that your finances and the overall planning are not too restrictive and allow you to grow your money over that longer retirement period. On the contrary, inflation may eat up your income.
4. Plan healthcare
You can’t imagine how much healthcare costs these days! Either from inflation or not, healthcare has humongous prices and usually affects the elderly. So, if you are planning on retiring soon, just make sure you have an affordable healthcare plan. A mistake that most people make is that they put off retirement until they’re old enough to get Medicare.
Be careful and plan your finances early enough so it won’t affect your peaceful years of life.
Are you taking enough care of your health?
5. Avoid the debt trap
Since the Great Recession of 2008, a lot of people are actually more aware of how annoying carrying too much debt can be. Still, a lot of them are paying debts that have lasted more than 10 years. A lot of retirees are paying debts at this very moment, and they are worried it won’t be paid off anytime soon.
If you are planning on saving more money for retirement, maybe you should take care of your finances even more. Because this can significantly increase the annual drawdown on investment and retirement assets.
It’s better to focus on paying off your credit card, the mortgage, or car debts years before your retirement so it won’t become a burden.
6. Reestablish your purpose
Have you ever asked yourself what your retirement purpose will be? Because having a great retirement is not about how good your finances are, it’s just what your purpose is during these years away from the work world and for everything that made you stressed.
You will have flexibility and much more freedom.
But remember that setting a “goal” or “purpose” is actually the best idea. Because if you don’t have it, you might find yourself dreading your free time and actually being bored. Maybe a sport will help you, and it will also keep you healthy, but also discover a new hobby that is fun.
Choose whatever makes you feel refreshed, happy, and healthy.
Even if your finances are pretty important, your health matters too! Try to make the most of your retirement so you won’t regret it afterwards.
7. Plan to stay on top of finances in retirement
It’s very important to manage your finances even if you’ve already retired. And it will be very important to stay on top of your finances because you will never know how changes to the law may affect them.
Even inflation is one risky factor. In order to achieve that, be proactive with your retirement and take it upon yourself to see what applies to you and your household.
If you still need some help from someone who is more experienced, you can hire a financial advisor who can evaluate your retirement plan. Find the best match in your city according to your needs.
Setting up this retirement plan can be discouraging for a lot of people, that’s for sure. Especially if they think they don’t have enough time to retire or to retire the way they really want. But the reality may differ. Because you actually have time and even if you don’t have enough, the solution is not to panic. Try to adjust your plan in order to maximize your finances.
If your life expectations are to live more than 90 years, then you might end up having more than 30 years of retirement. and that’s a lot! But remember to phase into retirement gradually. Put into balance everything you have at this moment and consider every single detail that will change after you retire.
Maybe a part-time job can help you or maybe you can retire a bit later, whatever works for you.
It’s up to you what you decide to do regarding your finances. Just make sure you make the right choices! In case you need some more financial advice, you are more than welcome to read about the 10 States Where You Can Get The Most Social Security.