Retirement; some dread it, some yearn for it. Regardless of where you belong, retirement is a time many avoid thinking about. The general conclusion being that it is still a long way out, until it actually comes around. You wake up one morning and you are 60, just a few years away from retirement, without a clear plan.
The number one fear of retirees is the loss of a steady source of income. If you fail to prepare for this time, rather than enjoy a time of relaxation and fulfillment, you could become financially miserable.
If you are yet to retire, you can always start now. Here are 9 ways to ensure your retirement years are financially safe, and ultimately relaxing.
1. Determine Your Retirement Income
Have you taken stock of your retirement income? Doing this is a necessity if you are to transition smoothly. Identify all available sources of income during your retirement and envisage just what you would be getting from each, and how.
2. Plan Your Retirement Budget
When you have a clear picture of your income timeline and level post retirement, it is important that you begin analyzing your expenses. First, come up with a before retirement budget that captures your regular spending pattern. Then prepare a post retirement budget, highlighting what would be dropping from your list of expenses. Do not underestimate your potential expenses as this can be disastrous. Your projected expenditure will help determine if your income sources are capable of carrying you through this time.
3. Run A Fixed Deposit Account Or A CD
A regular retirement savings or checking account can easily be hijacked for other uses. If you do not wish to risk your available retirement savings a fixed deposit account can come in handy. This form of savings account provides higher interest rate against a longer, specified “don’t touch” period during which you have no access to the money therein. This is much like bank CDs, although interest rates might differ.
4. Draw Up An Investment Plan
Rather than ‘simply’ keeping your funds in a fixed deposit account or purchasing a bank CD, you can always consider the option of a retirement investment. But you do not wish to squander all of your savings in one terrible investment. If you wish to go the investment route, be careful when drawing up your plan. Every investment has its pros and cons, so you must be able to weigh these against themselves.
5. Social Security
If you are beginning your planning quite late, or somehow found that your planned retirement expenses is well below your savings, fret not. With social security benefits always available, you are fairly covered. Keep in mind that the later you begin collecting your social security benefits, the more you would receive in monthly benefits. So, do well to plan your expenses for at least the first few years of your retirement if you cannot take on all of it.
6. Convert Your Passion Into An Income Source
Another reason why many dread retirement is the loneliness it breeds. If you fill in your time with enjoyable and rewarding activities, you can always combat loneliness. One way to do this is to convert your passion into some form of income. Obviously you would be cutting down on regular work, but you can always use the internet to promote your business. In fact, starting an online business can form a part of your retirement income planning.
7. Understand Retirement Income Taxation
Various retirement income sources are taxed differently. Taxes have some impact on your expected retirement income. Note that most retirement accounts including IRA accounts, 401(k), 403(b), etc. are taxed in retirement. Even annuities (should you consider them) are tax deferred until your retirement days when withdrawals begin. When considering your expected retirement income, be sure to factor in taxes so they do not come as an unpleasant surprise. This will aid your planning as well as retirement budgeting.
8. How Much Work Is Necessary?
Except you are financially set for life, taking up some form of work is one way to keep your retirement income looking up. To meet your retirement goals, it is important that you consider how much work you must take on and how that would affect you and your lifestyle choices. Weigh the pros and cons of any decision and arrive on a conclusive work schedule.
9. Save For The Worst
There’s a lot you cannot anticipate in your retirement years. You might have enough retirement income to keep you living comfortably, but that’s not all. If there was to be an emergency, say a roof leak, grave illness, or even a delay in the coming of retirement payments, how do you survive? Do well to set up an emergency fund savings account and build up your contingency savings in this account.
With proper planning many are able to live comfortable lives in retirement. Diversity in income sources and a clear outline (and timeline) of retirement income is vital to prevent your entire retirement income being held in limbo by one source. Social security is a great provision, but it is one you do not want to rely upon. With better income, you can carefully plan for relaxation in your retirement years.