It doesn’t matter how old you are — you should make time for retirement planning. The earlier you begin, the better your chances of ensuring your comfort in your sunset years.
What should you do to get ready at any age? The following five tips are universal to any life stage. Follow them to learn how to prepare your finances for retirement now and sleep with improved peace of mind.
1. Buy and Upgrade Your Homestead
There’s sobering news if you rent. Prices continue to outpace inflation, and the trend doesn’t look like it will slow down anytime soon. The more time you spend putting money in your landlord’s pocket, the less you have for retirement.
Make saving up to buy your priority. Sit down with your budget and identify areas where you can cut back and pad your income. It might take significant sacrifice, particularly in today’s market, but you can get there. Investigate available down payment assistance options in your jurisdiction.
Easing responsibilities in retirement means a decrease in income, so get started on making necessary upgrades while you remain in the workforce. Features such as elevators ensure your continued mobility in your golden years by letting you skip the stairs. Most household falls happen in the bathroom — and grab bars come in handy even if you don’t have a health issue.
Sustainability upgrades help protect the planet while decreasing your golden-year expenditures. Adding solar panels to your home can save you a fortune on utility bills each month. If you hurry, you can still take advantage of tax incentives for going green.
A compost bin saves money on fertilizer, and a greenhouse lets you grow produce year-round, slashing your grocery bill. If you get talented with your green thumb, you can look forward to a retirement filled with getting to know your neighbors who stop by to pick up veggies from your roadside stand.
2. Pay Off Debts
It’s possible to live on very little — if you don’t have debt hanging over your head. Some retired adults have seen their Social Security checks garnished for unpaid student loans. Get on an income-based repayment plan and investigate your forgiveness options if you work in an eligible sector.
When it comes to consumer debt, your priority is paying off the highest-interest loans first. Another approach is to pay off your smallest debt and then move on to the next-largest one. Investigate consolidation loans, but keep in mind that you’ll undo many of the benefits if you later incur new liabilities.
Another creative repayment strategy requires you to take on a secondary income stream. Divert it to a bank account unattached to the one you use for daily expenditures and use it to save enough to pay each balance in full.
Once you reach the magic number, contact your lender and negotiate. If you can prove you can fulfill your obligation, they may agree to your request to reduce the accrued interest.
3. Diversify Your Investments
If your only retirement vehicle is a standard savings account, your money won’t keep pace with inflation. The average interest rate is less than 1%, which is not nearly enough to keep up with soaring health care and housing costs.
Diversifying your investments doesn’t need to mean taking uncomfortable risks. Today’s apps put market research in the palm of your hand and let novice retail investors sink their cash into partial shares of stocks if they don’t have the money or market-savvy to purchase full shares.
However, if you don’t feel comfortable tackling individual investments, why not look into a mutual fund? You can even find those that only invest in companies that align with your values, letting you feel good about where your money manager directs your cash.
One considerable benefit of recent tax reforms is letting you put more money aside for retirement. The IRS raised the contribution limits that you can stash away before you incur a penalty, and you can often reap deferred tax benefits.
Talk to your HR department to adjust the percentage of your paycheck devoted to future savings or coordinate with your local bank or credit union to establish one if you are self-employed.
4. Start a Residual Income Stream
Unfortunately, unless you are among the privileged few, your nine-to-five might not pay enough to survive in today’s economy. However, you are a human being, and grinding yourself into the dust can devastate your health and leave you unable to enjoy your retirement. It’s one thing to take on a second job, but you risk your quality of life once you get to three or four.
One of the savviest financial moves you can make in the American economy is to transform your side hustle into a residual income stream so you can make money while you sleep.
Are you an expert in any subject? Consider starting a YouTube channel or blog, or maybe even penning a self-help book about your passion for restoring classic Camaros. If you love crafting, an Etsy shop can pull in extra income from your pile of pandemic knitting projects.
Why is starting a side hustle so smart? Remember wage stagnation. If you lose your job today, you’ll likely take a pay cut that can put you further in the hole. While you might resist the idea of monetizing your hobbies, it pales in comparison to working multiple unsatisfying jobs to make ends meet.
Eventually, you could quit your day job and do what you love full-time. However, even if you never do, it’s wise to create something to fall back on when tough times strike. Early 401(k) withdrawals can help you cover a crisis but leave you paying tax penalties and coming up short when you reach retirement age.
5. Cover Yourself
The reality of America’s for-profit medical system means one illness or injury could bankrupt you and cause a significant delay in your retirement savings. Please cover yourself with health insurance to decrease your chances of disaster.
What would you do if you lost your ability to work? Please consider investing in private disability insurance if your employer does not offer coverage. If you wait until you become sick, no company will give you a policy without a rider excluding the very condition most likely to leave you without an income.
Prepare Your Finances for Retirement Now With These Tips
Learning how to prepare your finances for retirement is a lifelong process. Begin taking the five steps above now to secure your future.
by Rose Morrison
Rose is the managing editor of Renovated and a real estate industry writer.