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Retire Early
Lifestyle
Retirement; like your parents, but way cooler
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In 1991 Billy and Akaisha Kaderli retired at the age
of 38. Now, into their 4th decade of this
financially independent lifestyle, they invite you
to take advantage of their wisdom and experience. |
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Managing
Your Finances Before You Retire
Breea Sandston
Retirement is a part of your life that you
are most likely looking forward to. It’s a time when you can relax, pursue
hobbies, and spend valuable time with loved ones. However, you need to ensure
you are financially secure to be able to enjoy it properly. You don’t want to
get to retirement age and be constantly worrying about money. The earlier you
start to plan your retirement, the better. You will be able to be prepared and
feel less worried about the stresses of money.
Photo
by Anna Shvets
In this post, we’ll have a look at some of
the steps you need to take to properly plan your retirement to feel financially
secure and prepared for the future.
Start Saving as Early as
Possible
The most important part of any successful
retirement plan is saving.
The earlier you start with this, the better. Your savings will have longer
to grow because of compound interest. This is the interest that enables you to
earn interest on your interest; this can dramatically increase your savings over
time. The first account you should start with is a retirement account. Many
employers will also offer to match contributions you make, so having a
retirement savings pot that is linked to your income is beneficial. You need to
set yourself a target so you know how much you need to save before you retire. A
good way to do this is by using a
retirement calculator. ‘A great way to make
sure you are saving each month is to set up an automatic saving to go out on
payday. When you do this, it stops you from being tempted to spend money on
other things.
Understand Your Retirement
Needs
If you want to make sure that you are
secure and retired, you need to have a full understanding of how much money
you're going to need. The amount is going to be different depending on your
health, lifestyle, and location; however, many financial experts generally
recommend you aim to replace about 70% of your pre-retirement income. Have a
look at your current living expenses and consider the cost of housing,
Healthcare, food, transportation, and any leisure activities that you want to
take part. Don't forget to account for any inflation, as this may affect your
savings value over time. Don’t forget to factor in things like
travel and
hobbies as these are often things that people look forward to during retirement.
Contribute Maximum to Your
Retirement Account
Once you start to save for retirement, you
need to focus on maximizing your contributions. The more you put into your pot,
the more you will have to enoy and live on when you retire. You will find that
the government will allow you to have some tax relief, and they will also
provide a bit of contribution to match or top up your contributions. Try to take
advantage of any catch-up contributions. For example, if you are over 50 catch
up contributions enable you to contribute more into your retirement accounts so
that you can make up for any contributions that you didn't make earlier in life.
It's also a good idea to diversify and tie your retirement accounts, so try to
have a mix of different types of accounts so that you have some flexibility when
it comes to roof drawer in the money you need when you retire.
Invest for Growth
Saving is only part of what you need to do
in order to have the right amount of money when you retire. You also need to
make sure you are investing your savings properly, and this is really important.
Ideally, you need your money to grow over time so that it outpaces inflation and
provides you with the finances you need later in life. Think about using a
diversified investment plan where you have a mix of different investments, such
as stocks, bonds, and real estate. Stocks will usually offer a higher return,
which makes them important for long-term growth. However, they can be seen as a
higher risk. Bonds and real estate are usually a little bit more stable. They
have lower returns, but they can help balance your portfolio and protect it from
market volatility.
Plan for Future Healthcare
Costs
Healthcare can be a huge expense when you
are in retirement; therefore, you must plan these costs well. Healthcare bills
can be extremely expensive even if they don't include long term care. It's a
good idea to make sure that you have health insurance in place as it will pay a
significant portion of any Healthcare costs that you do have. You have to bear
in mind that some health insurance is don't cover everything, so you will still
need to plan for any expenses. You might want to think about having a health
savings account in place that goes alongside your retirement savings pot and you
put a separate amount in there each month.
Write a Will and Plan Your
Estate
Writing a well and planning your estate is
an essential part of making sure that your finances are in order for your
retirement and beyond. When you write your will, it will set up an estate plan
that helps to protect the assets that you have grown through your life, and it
makes sure that they are distributed according to your wishes. You should create
a will, which is a legal document that shows exactly how you want your assets to
be divided after you pass. It also gives you the power to appoint guardians for
any children and designating executor to carry out your well exactly as you have
put it.
If you don't have a will in place your
estate may be subject to state laws which may not follow your preferences. You
may also want to think about a living trust which enables you to transfer an
asset to beneficiaries without having to go through probate which can be costly
and time consuming. Is a good idea to seek legal advice when you are writing
your will and a state planning as it can be extremely complex. It's a good idea
to work with an attorney that specialises in these areas as they can help you to
deal with all the legal requirements. If you are looking for advice on writing a
will, managing your estate, and looking after your finances such as whether you
should sell settlement payments, you can find more information
here.
Manage Debt Before Retirement
If you retire with debt, it can put a
massive strain on your finances. This means you should be aiming to pay off any
high-interest debt, such as personal loans or credit cards, before you get into
retirement. If you can work towards paying off your mortgages as well, this will
enable you to enjoy retirement without having the burden of any monthly payments
coming out every month. Make sure you pay high-interest debt as a priority, as
this will save you the most money in the long run. You should also avoid taking
on any new debt as you get closer to retirement, as you will have less income to
repay once you start claiming your pension.
Conclusion
Planning for your finances during
retirement can feel daunting. However, it is a necessity if you want to make
sure you are living the retirement that you want. These tips should help you to
get on track with arranging your finances before you retire.
About the Authors
Retire
Early Lifestyle appeals to a different
kind of person – the person who prizes their
independence, values their time, and who doesn’t
want to mindlessly follow the crowd.
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