Knowing that you need to save for retirement and managing to actually do so are two different things. Even if you are well aware of everything that you should do to get ready, you may have faced obstacles to doing them. In particular, many within a decade or two of retirement find themselves caught between the financial needs of aging parents and minor or college-aged children. These may be prime earnings years, but very little of that money might be going toward savings. Even if you are not in this particular situation, you might have struggled to save as much as you hoped, or you may simply not know how prepared you are. The tips below can help you figure out where you are and what you need to do.
Envision Your Retirement
First, think about if you are currently setting your finances up for success, and for how long do you imagine you will keep working? For some, the answer will be to leave work as soon as possible while others may not want to stop at all. Keep in mind as well that working doesn’t necessarily have to mean staying at your current job. You might want to work part-time at something you enjoy more or start your own business. Another option might be taking some classes at a local college, particularly if they offer discounted classes for seniors.
On the other hand, you might decide you don’t want to keep living where you are. You might want to sell or rent out your house and hit the road, traveling North America, or even the world. While this might sound financially risky, many Americans find that their savings go much further in other parts of the world. Whatever you decide, you don’t have to commit to it. In fact, your retirement may easily last two or three decades, and you’ll probably go through a few changes in that time. However, having a sense of the lifestyle you want will help you with the rest of your planning.
Take Stock
You also need to take stock of your savings and other assets. There are several different things you should consider. First, if you are like most people, you have had several different jobs and may have a variety of different accounts unless you rolled them all diligently into a single one as you went along. Even if you think you have done that, take the time to sit down and think through all of your employment and make sure you haven’t lost track of an account along the way.
Next, look at your other assets. Do you have investments? Are you going to sell your home? You may not be aware that you could also potentially sell your life insurance policy. This might be possible through what is known as a life settlement. A calculator online can help you determine what your policy may be worth. If you click to see on this site, you can read more about a life settlement. While you won’t get the full death benefit in a life settlement, you can get a significant amount money that can help you in retirement.
You must also be sure to account for Social Security. You can get an estimate of what your payments will be. If your spouse made significantly more than you, you might be able to draw on their benefits instead. If you are widowed or you were divorced after at least 10 years of marriage, you may also be able to draw on this. This won’t affect the amount that they are able to draw. If you are divorced or widowed and your spouse had a pension, you might be entitled to a portion of it. For the former, you should review the divorce agreement. If you or your spouse were in the military, you may be entitled to other benefits as well.
Prepare
Whatever your plans are, it’s a good idea to prepare for things to go wrong as well. This means having easy access to a liquid emergency fund. If you already have one, simply continue to maintain it. If you don’t, you should start building one now. It should have several months’ worth of expenses in it. You should make an effort to pay off all your debts before you retire. You may also want to look into long term care insurance.
In addition, find out whether Medicaid spend down laws apply to you and whether you want to take steps to protect your assets with this in mind. If you don’t already have an estate plan, this is the time to make one. Legal and financial professionals can help you create one that suits your purposes. Your estate plan is not just about what happens to your assets. You can also appoint someone to make financial and legal decisions on your behalf if you are unable to do so. In addition, you can name the person you want to make your health care decision.
Keep Investing
If you haven’t saved enough, there are a number of things you can do to improve your financial situation. For most, waiting until you are 67 to retire is a good idea since this means you can max out your social security benefits. However, you can continue working well beyond this point if you want or need to. Generating money in retirement is not just about working though. This might be a good time to pay a visit to a financial professional and talk about strategy for the next stage of your life.
Conventional wisdom says that as you approach retirement, you should become more conservative in your investment choices, but is this really necessary? When people are living into their 80s, 90s and beyond, it’s not as though you don’t have years or even decades to recover. While this is still not the same as when you were in your 20s or 30s, you also don’t have to be extremely conservative with all of your investments. This becomes even more important if you lack adequate retirement savings. You can create an investment portfolio that offers a mix of risks, and you can even purchase individual stocks if this approach interests you.
