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3 Ways to Prepare Financially for Retirement

Personal_Finance / Pensions & Retirement May 23, 2020 - 05:52 PM GMT

By: Justin_Weinger


Planning for retirement is a process that takes time. To have a fun, safe, and secure retirement, you’ll need to create a financial cushion to fund it. Planning how you’ll get there starts with thinking about your goals. Consider how much time you have to meet them to help you determine what accounts you need to get enough money for your future.

Understand How Much Time You Have

Your expected retirement age and current age will lay the initial groundwork for your strategy. The longer you have between now and retirement, the better your situation will be. You can take higher risks now than you can later. So, if there are still over 30 years until retirement, most of your assets should be in stocks and other higher-risk investments. There will still be volatility, but stocks often outperform other investments.  Once you get older, your portfolio should focus on preserving capital and gaining income. You’ll want to allocate more toward securities, like bonds. While they may not give you high returns like stocks, they won’t be as volatile, and they’ll still give you income.

Start Saving and Stick to It

Once you have a better idea of how much you need to be putting into your account, it’s time to start following that goal. One way to save for retirement is to start paying off debt now. Car payments, mortgages, and student loans can all chip away at your income, leaving you little to invest in your future. If you have student loans, refinancing them may help you save money by lowering your interest rates. The amount of money you might save will depend on factors such as your credit history and your current income. When you’re planning for retirement, you’ll want to have an accurate estimate of how much you might save. Using a student loan calculator allows you to preview your potential savings when you refinance your student loans. That way, you can plan what kinds of other lifestyle changes you may need to make, such as spending less on dining out.

Determine Your Spending Needs

You’ll be better prepared to define how large your portfolio needs to be when you have realistic expectations about spending habits. Many people think that after they retire, their spending will be less than what it was before. But that is not a realistic expectation, especially if you might have medical expenses. Plus, the cost of living might go up. If you have travel or other items to check off your bucket list, you’ll want to factor that in as well. Since you’ll have more free time on your hands, you might end up spending more on entertainment. Or you could end up outliving your savings.

Sometimes, you may need more money than you think for larger purchases, such as educational expenses for your children. If you want to buy a new home, you may need to spend more than you think to get the features you want, such as first-floor living. Remember to look at your plan each year to check that you’re still on track with your funds.

By Justin Weinger

© 2020 Copyright Justin Weinger - All Rights Reserved Disclaimer: The above is a matter of opinion provided for general information purposes only and is not intended as investment advice. Information and analysis above are derived from sources and utilising methods believed to be reliable, but we cannot accept responsibility for any losses you may incur as a result of this analysis. Individuals should consult with their personal financial advisors.

© 2005-2019 - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.

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