Financial decisions become more critical as you approach retirement years. As years go by, you have accumulated financial obligations and resources, and new complications arise as you contemplate pensions, medical insurance and social security, among other financial concerns. If you are going to be a stay-at-home retiree, your earning years are shortening as retirement approaches, but your spending will continue. There is, therefore, a need to plan ahead on how life will move on beyond your salary.
The first step towards preparing for retirement is to establish your financial standing. Compile a detailed list of your earnings and expenses including bank loans and mortgages. Estimate your retirement income and calculate the difference compared to your current income. If you do not have an accurate budget, keep track of your needs and expenses for a couple of months to establish where your money goes.
Make a Budget
After you have an accurate idea of where you stand financially, prepare a budget. Remember to note the things that will change after retirement such as salary and commuting costs. Be sure to set aside money for emergencies and funds to sustain you for a few months before you can process your pension and other retirement bonuses.
Examine your investment portfolio to determine if the returns can sustain your financial needs after retirement. Nancy K. Schlossberg, a professor at the University of Maryland and author of “Revitalizing Retirement”, points out that the transition to retirement is not easy because it takes time to get a new life. It is paramount to set financial goals and increase income through other avenues. Consider more straightforward investments such as government bonds and buying rental property.
Make Necessary Adjustments
Depending with how well you prepare for retirement, you might have to change your lifestyle completely. Move to a cheaper house, cut on your shoes, clothes and accessories expenses, or find a part-time job. How much your income changes will dictate the level of changes you make. If your children are still in college, consider applying for government assistance such as bursaries.
Seek Professional Advice
Building a confident retirement is not an easy task. Investments, planning and saving, requires professional assistance in order to do it right. Work with a career adviser to plan when to retire and your options should you decide to delay your retirement, which is a common occurrence today. A study by Pew Research revealed that more people today opt to delay their retirement. A professional will also help you decide on when to start taking your pension and whether you want it as a tax-free cash lump sum or to explore other arrangements. Consult about ways to boost your pension and make use of an enhanced annuity if you are sickly.
It pays to prepare for retirement early. Experts advise you start to think and plan your options at least two years to your retirement date. Professional advice is critical because a single decision can model your income for the rest of your life. Consulting with trustworthy family, friends and colleagues can also help illuminate key questions that will guide your planning.
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