Retirement Funds: Three Ways You Can Be Preparing Financially
Approximately 43 percent of homeowners are worried their pensions will not cover the costs of their retirement, according to a study done by SunLife. At a time where we are living more active and longer lives after retirement, retirees are considering how they will finance their retirement goals when it comes to planning their retirement. With this in mind, a well thought out financial plan holds more importance than ever and proper management of your retirement funds that you have spent your career building up is essential to living a full and happy life after retiring. However, employees are still at a loss regarding what to do with their retirement funds. One third of workers are uncertain about their plans for their retirement funds with 1 in 3 of them moving their funds out of a retirement account, based on advice from a financial professional. Here are a few tips for effectively managing your money as you plan your retirement dreams.
Identify Ways To Cut Spending
One of the first and more effective ways to manage your money in retirement is to identify ways of cutting your spending. With retirement, it is expected that you will lose your employment stream of income. Therefore it is wise to consider how you will cope with, and if you can cope with your current expenses after retiring.
Some retirees consider downsizing their home, since their kids are often grown and moved out. Others also consider look at their homes and ways to reduce finance costs attached to their homes.A lower interest rate or a switch from a variable rate to fixed rate can end up saving your thousands each year in finance charges. In addition, consider more effective options for medical and ongoing healthcare. A recent study by Fidelity found that Americans over 65 spend an average of $260,000 on medical care throughout retirement. Purchasing a policy in your younger years or enrolling on to state backed healthcare plans can provide to be cost effective in the long run.
Establish Income Streams
Whether it is through investments or other post retirement income streams, establishing ways to keep earning after your employment ends is a smart option to keep financing your retirement lifestyle. Here is where you would research and compare the best uses of your cash and the returns you can get. Comparing returns from investing in stocks and saving in a retirement account along with returns from an IRA account are some of the considerations that should pop up here.
Even though you have hit the retirement age and are now entitled to pension, it does not necessarily mean the end of your professional career. Some retirees go on to set up side businesses, working part time or on their own hours. You can also look into ways to boost your pension in the few years prior to your retirement by either increasing your contributions or delaying the date.
Compare Retirement Plans Against Your Means
Finally, as you approach retirement consider not only how much you have saved away but what you will be able to achieve with that money. Many of us have retirement goals of traveling or taking up certain hobbies. However, a part of proper financial planning for your retirement is considering whether those dreams are achievable with the current amount you have.
Always remember to allow for inflation and general rise in costs as you try to estimate the affordability of the future. A key consideration is your various retirement income options available, whether it be guaranteed annuity for life or receiving a lump sum amount. Be sure to check the costs attached to options since some companies may charge a percentage for early lump sum withdrawal.
Proper financial planning ahead of your retirement is vital to living the retirement lifestyle you envisioned. Armed with the right information and proactive attitude, you can begin to make the right arrangements, specific to your situation. By doing this, you can not only protect your retirement assets but possibly increase them and avoid the looming option of a less than optimal retirement.