For many people, retirement means a more relaxed lifestyle and a chance to enjoy travel, hobbies, family, friends and recreational activities. The sooner you start preparing for retirement the better.
If you start too late, you may find retirement difficult. If you’re smart with your money and pay attention to how you use it, save it and invest it, you’re more likely to be able to retire comfortably.
- Calculate how much money you need to retire
This starts with understanding your daily expenses. Fixed expenses include rent or mortgage, groceries, utilities, taxes, insurance. Discretionary expenses include travel, gifts, entertainment and clothes.
Medicare won’t cover all your medical expenses, so you need to factor costs of extra medical coverage into your retirement budget. Maine Medicare Supplement Plans are designed to work with Medicare to add additional benefits to traditional coverage.
- Start saving money
The ideal amount of your gross income to save for retirement should be 10% to 15%. If you’re saving below this amount, boost it by 1% or 2% each year and you’ll reach the required level.
You may have an employer-sponsored saving plan, such as a 401(k). Alternatively, you can open up an IRA that allows for automatic withdrawals from your bank account to the IRA on a scheduled day.
- Cut unnecessary expenses
The best way to start cutting down is to find out exactly where your money goes. Analyze your bank statements and create a detailed list of your spending. You will always have some unexpected expenses but look for daily, regular expenses.
You may find that you’re buying a specialty coffee two or three times a week or eating takeaways for lunch most days. Small expenses can quickly add up and making a few changes you will hardly even feel can help you to save more.
- Invest wisely
Many options exist when it comes to investing money – some of these are mutual funds, stocks and bonds, exchange-traded funds, real estate, gold and silver. It’s worth getting some sound financial advice before making any investments if you want them to work to your advantage.
Learning how to invest wisely can help you to grow your money due to compound interest. The younger you can start, the more your money will grow. Investing does involve some risks, and you can never avoid them entirely but you can reduce them significantly by investing wisely.
- Choose the right retirement date
When you take social security can affect your finances. If you only take it at 70, your monthly benefit is higher than if you take it earlier. Of course, personal factors such as ill-health could prevent you from waiting that long.
If you cut down and keep working part-time, income continues to come in and you won’t need to use as much of your retirement savings. After age 59, you are able to take withdrawals from a Roth or Traditional IRA to make up for your reduced income, enabling you to wait longer for retirement. Working part-time can also help to ease you into retirement.
- Think about your home
If you have a home, you will want to pay off your mortgage before you retire. You need to factor this into your planning. Selling and downsizing or moving in with family members can be a smart choice.
A home that’s too big for you can be a real burden down the road in terms of upkeep, security, taxes etc. Some of the money from selling your home could be moved into your retirement savings and could make a big difference to how comfortable you are financially during your retirement.