Retirement is a huge milestone and life event that many people in the workforce look forward to. Some dream of traveling the world, while others plan on using their retirement as an opportunity to spend more quality time with friends and family. While retirement seems like a paradise, having a successful one — however you choose to define it — will not likely happen on its own. In fact, despite what most people believe the transition from career life to retirement can be awfully bumpy. In order to have a successful and enjoyable retirement, it is essential to first create a plan in order to reach specific goals in retirement.
Whether you are planning to retire in five, 10, or 15 years, to help you better plan for a more successful retirement, consider the following factors.
When planning for retirement, it is important to consider what you will be spending your finances on once you are out of the workforce. In addition, you should think about what you want or plan on doing, with your money during retirement. It is important to factor in the costs associated with housing, travel, food, transportation, entertainment mortgages, rent, utility bills, and more. Once the expenses are defined and planned out, they can be used as a guide for what you will need to pay later on. If you plan to have your debt paid off during retirement, your expenses may be smaller than what expenses you are currently paying. For those concerned with their expense amount, there are multiple ways to limit expense.
- Downsizing your home
- Eliminate unused club memberships
- Reduce or eliminate cable or cell phone bills
- Find new ways to reduce travel expenses
- Consider term life insurance
- Sell a vehicle
As mentioned above, dealing with debt is a part of retirement. As you plan to leave the workforce, you will want to create a plan to eliminate as much debt as possible. When you have an obligation to debt, there is a source that is draining your income. In addition, when you have debt, you are essentially paying interest to someone else, rather than using it for your benefit, like for traveling or investing. Before committing to retirement, it will be helpful to reduce the amount of debt you have as much as possible, including any mortgage or consumer debt. The less debt you have going into retirement — ideally having no debt — the more likely you are to enjoy a successful retirement and have money for expenses like traveling or moving to another state. If you want to ensure a debt-free retirement, check out some steps to take to start off in the right direction.
1. Swear off consumer debt
Many people make the mistake of carrying consumer debt as they are saving for retirement. One of the most common ways to go into debt is by overusing credit cards, but it can also come in the form of personal loans or money that is owed to other parties. Those planning to retire should aim to eliminate any consumer debt with high interest as quickly as possible — ideally before retiring — and swearing off any irresponsible credit use after retiring.
2. Get rid of car payments
Having vehicle debt while going into retirement can be a burden. Car payments are a quick and consistent way to drain money from your savings. As you plan for retirement, you should consider your transportation needs before your last day in the workforce. If you can reduce or eliminate car payments as retirement approaches, you’ll be better enabled to aggressively save your money. If a paid-off vehicle becomes unreliable during retirement, consider purchasing a used vehicle. While in retirement, it may be beneficial to avoid low-interest rate loans of any kind.
3. Downsize, rent, or pay off your mortgage
Housing should be one of the main focuses of a comprehensive retirement plan. For those who want to attain a debt-free retirement, one of the most common things getting in the way is a home mortgage. While staying in a paid-off home is the ideal situation to keep housing costs low, not everyone is mortgage-free as their exit day approaches. You can live in a debt-free house during retirement by downsizing your home, choosing to rent, or moving in a location with a low cost of living.
When it comes to planning for retirement with lingering debt, the key is to make smart financial choices. Instead of panicking about debt, try to look for ways to take advantage of a low-interest rate environment, while still increasing the amount in your retirement savings.
When planning for retirement, many people do not like to think about a time where they may become incapacitated, but it is a possibility. It is possible that, in the future, events may occur that require you to spend time in a long-term care facility, like a nursing home or an assisted living home. When these situations occur, your money may not go as far you had planned. Before the exit day, you should carefully consider the number of finances that may be needed to cover any potential long-term living arrangement, as well as the available options.
Just because you retire does not mean that you are set for the rest of your life. Many people forget that they will likely eventually need a source of income while they are in retirement. When it comes to retirement income, many people think about it in terms of saving enough money in a retirement investment account that enables them to make consistent withdrawals without excessively diminishing the capital. During the retirement planning process, it is important to consider your monthly income needs, and how you can meet them.
Not only should you consider your money when planning for, and during retirement, you should think about what happens to it after you pass on, too. Death is an unfortunate situation, but it happens eventually. Unless you don’t care what happens to your money and belongings, as well as the numerous taxes and expenses that will be passed to your heirs, you will want to have an estate plan in place. During this process, decide what you want to happen to your estate and whether there is a beneficial way to protect your owned assets. When it comes to estate planning, a reputable estate planning attorney can help you sort through your options.
While social interaction and money do not have much to do with each other, it is an important factor to consider while planning for retirement. When planning for retirement, people plan for a relaxing, often adventure-filled experience. It’s not often that people plan for a retirement that is lonely. Think about your family, friends, and other options for social interaction. It is estimated that most people spend one-third of their lifetime at work, much of their daily interactions coming from their coworkers. Once you are out of the workforce, it is likely that relationships will begin to fade. Retirement planning is the perfect time to grow relationships with those that will last long after retirement. If you have a life partner, it is essential to continue to cultivate that relationship, so that retirement can be enjoyed together. Having social interaction during retirement is an easy way to keep you satisfied, not to mention beneficial for the health of your body and mind.
Get the retirement planning you need
As you prepare for your retirement, you may need some help with planning. Long before your exit date, make sure that you do an appropriate amount of research and think about your needs associated with the factors above. Successful retirements come from thoughtful planning and preparation, and with the guidance of a financial advisor, you will be better prepared when your exit day arrives.
If you are planning to pursue retirement soon, at Kennedy Wealth Management, our retirement income advisors can help you work through many of the challenges that make makes retirement planning overwhelming and stressful, putting you on a smooth path towards a financial future that you want to attain for you and your family. Our team will work closely with you to create a personalized plan that considers your current income level, expected retirement age, post-retirement plans, and current savings and investment. At Kennedy Wealth Management, our retirement income planning advisors will develop a plan with ou and your family in mind, because you want to make your retirement successful and enjoyable. To learn more about our financial planning services, contact us!