Retiring early often conjures up mental images of sitting by the beach holding hands with your spouse as you watch the waves rolling on the shore. Or maybe you see yourself sitting on the porch knitting… or just rocking in your rocking chair and telling the neighbors’ kids to get off your lawn.
But all levity aside, to retire happily and peacefully, you MUST plan effectively and early on. Far too many people underestimate just how much money they’ll need for retirement. With increasing inflation rates and the prices of just about everything skyrocketing, you must do the math well.
The age of retirement keeps going up as people realize that they just don’t have enough money to take a much needed break – with many having to work even when they’re tired and worn out. This unfortunate situation can be avoided by planning well.
- Are your debts paid off?
Before even thinking of retiring, you should aim to be debt-free. Pay up all revolving credit (E.g. credit cards, lines of credit, etc.). Ideally, your car and home should be fully paid up too.
When you have no debts, whatever money you have will only be for your daily expenses.
- Have an emergency fund saved up
You should have about 3-6 months of your income saved up just in case of an emergency. Your car may break down or your roof may have a leak. Having savings will help to cover these unforeseen expenses.
- Do you need to support anyone else?
These days, with the massive student loans and high cost of housing, more and more people are living with their parents. Many are unemployed and live off their parents.
This may not sound politically-correct, but it’s the brutal truth. If you have to support someone else, you’ll need to know how much they need and for how long you can support them.
- Have you made plans for assisted living?
As we age, medical issues may leave us debilitated and needing constant care. If you have good health insurance that has a maturity date, you’ll have money to pay for assisted living.
If your adult child is willing to pay for your assisted living costs, that would be helpful. But if you don’t wish to be a burden to them, this will be something to think about.
- Downsizing
One of the best ways to have more money will be to downsize. If it’s just you and your spouse, you may choose to sell your home and live in a smaller house or an apartment. The money you make selling your home will serve you well in retirement.
- How do you plan to spend your retirement?
The activities you have planned for yourself in your golden years will determine just how much money you need. If you enjoy gardening, you won’t need much money to fund your hobby.
However, if you plan to spend your days playing golf, you’ll need to pay for a membership to a golf course and so on.
The more activities and socializing you have planned, the more money you’ll need. It would be a good idea to plan a budget for your senior years just to get an idea of how much money you’ll need.
You can do this even if you’re 45 years old. In fact, the earlier you plan for retirement, the better. Remember to factor in inflation when doing your projections.
- Can you create a side income?
With online marketing, many seniors will be able to make anywhere from a few hundred extra dollars to even a 5-6 figure sum. As long as you do it right, you might be able to make even more money after retiring than you would have at your day job.
- What’s your mindset like?
Some seniors do not wish to work at all after retirement, while others would prefer to be busy and engage in part-time work. The former will need more money saved up for retirement (unless they’re wealthy) whereas the latter can get by with less since there’s income still coming in.
- What does your spouse want?
Ideally, both partners should be on the same page after retirement. If one wants to lead a quiet, idyllic lifestyle but the other wants to go on vacations they never had time for before – you’ll need to decide if your retirement funds can cover the increased expenses.
So, discuss with your spouse beforehand what retirement means to both of you.
- Do you have investments?
If you’ve invested in stocks that pay dividends or you’re a proficient investor who has been growing his/her money over time, you’ll know how to make your money work for you.
This knowledge will serve you well into your senior years and you’ll still be able to invest and enjoy a good return on your investments. This will ensure that you have sufficient funds.
The pointers in this article are very pertinent to retirement. Take them all into consideration before you retire too early only to discover that you don’t have enough money saved up to retire. Human life expectancy is higher now than it ever used to be. The cost of living is higher too. These 2 factors combined has created a situation where people need to be especially cautious when planning for retirement. So, plan wisely.
“Don’t simply retire from something; have something to retire to.”
Harry Emerson