How will I afford my expenses in the post-retirement years? That is the one question that crosses everyone’s mind at some point in their lives. A large number of people do not have a plan for their retirement. Having insufficient retirement funds is one of the biggest financial worries of more than 50% of the population.
But it is never too late to start. Even if you are in your 50s, you still have 10-15 years to ‘tighten the reins’ and save for your retirement. It will give you much-needed peace of mind and keep you from all the hassles during any emergency.
If you want to be financially stable during retirement, here are some valuable tips:
Start saving as soon as you can
The earlier you start, the more benefits you have. It is true for every investment. You need to start saving as soon as possible because each penny saved will add significantly to your retirement savings pool. Moreover, the power of compounding will start working to boost your savings exponentially with the passage of time.
Remember that around 30 percent of working adults say they have no savings for retirement funds. But this number declines as they move towards their retirement age. The cue here is to get started whenever you think it is feasible and not keep delaying your decision.
Be debt free
A debt at any stage of life can be harsh on savings. It is when you are close to your retirement age. When your savings are scarce, having debt can be a substantial financial strain. The interest burden on the debts can hit your ability to save. As you approach your retirement age, ensure that you do not have any outstanding debts. If any, whether that is vehicle loans, credit cards, private loans, etc., make a special and aggressive effort to pay off the debts before you retire.
Diversify your portfolio
The age-old adage tells us that we should not put all our eggs in one basket. It holds for saving for retirement as well. You should not put all your savings into one account. Having only one form of investment increases the risk of losing all your savings in an emergency. It is advised that you invest in a diversified portfolio.
Asset allocation plays a crucial role while planning your retirement. You should also have some liquid cash handy when you need it. You should consider your risk tolerance and years in retirement before finalizing an investment.
Consider potential retirement costs
Life after retirement can be full of surprises – there could be runaway inflation and high gas prices, for instance. You may have to incur costs that you may not have planned for. As a result, it is always better to keep a certain buffer amount to cover your expenses. You should also consider the potential expenses in old age, including dental and other medical costs, long-term care charges, income tax, etc. Proper financial planning allows you the freedom to lead a peaceful post-retirement life.
Plan your expenses
It is good to reassess your financial profile and savings and make adjustments if required. Consider downsizing or relocating to a city with a lower cost of living. For instance, while traveling the world can be an enrapturing idea post-retirement, going on vacation during the off-season can save you a significant amount of money.
Keep earning during retirement
A report by Provision Living states that more than 20% of the retired population continues to work – probably even more so when the cost of goods are so high. It adds that it is not due to a shortage of money but because they enjoy their work. Post-retirement, you can take up work you always wanted to take up. It can be either a part-time or full-time job as per your preference.
Retirement time is a golden opportunity to leverage the skills, talents, or hobbies you have always wanted to try out. It can be anything ranging from teaching music to church work on Sundays. In addition to having a purposeful time, it will also add up to your savings.
Work with a financial planner
You can always benefit from expert advice. Financial planners are aware of the unique challenges that retirees face. They can chalk out your investments and expenses and suggest ways to optimize them. Also, if you are not experienced in financial planning, you can always consider working with professionals. They can guide you in choosing your retirement plans customized to your needs.