It is the long-awaited dream of every working adult: the relaxation of retirement. For some, though, this dream may never come to fruition. Lack of savings, ballooning debt, and overspending are just a few of the roadblocks preventing an aging workforce from realizing their retirement goals. Whether you are 25 or 55, the task of preparing for the future is an important one. Begin today by following the essential steps below.
- Tackle debt. Credit restoration (often termed credit repair) is imperative in the world of stress-free retirement. If you are approaching the age of career departure, now is the time to get serious about your financial burdens. Take a look at your debt, and adopt an aggressive repayment plan while you are still employed. Using continued cash flow will help you avoid dipping into your hard-earned retirement accounts in the future.
- Manage insurance issues. Insurance needs change as we age, and retirement is no exception. Review your policies while you are still employed and make the necessary changes now. Be sure to consider the cost differentials of:
- Homeowner and auto coverage
- Health insurance (if retiring before age 65)
- Long-term care costs
- Life insurance coverage
Note: Providers are more likely to offer better rates while your income is steady and your credit score is clean.
- Invest wisely. Too many American wait to save for retirement, resulting in smaller investment accounts and halted plans. Regardless of your age, it is never too early to take advantage of compounding interest. Work to contribute the maximum amounts to your 401(k), IRA, or other investment vehicle. As you get older, the federal contribution rules bend to allow additional savings. For example, while Steve was only allowed to contribute $4,000 to his IRA last year, the amount increased to $5,000 after his 50th birthday.
- Do the math. So, you have met your credit restoration goals, invested for retirement, and put your affairs in order. All is well, right? Perhaps not. Before taking the plunge into full-time retirement, consider the likely cost of living in the years to come. While your investments may rest in the high six-figures or even the millions, few people realize how quickly those assets can disappear. You know how much you’ve saved, but how much do you actually need to live comfortably? Financial planners recommend saving roughly 80 percent of your most recent income for retirement. For example, if Mr. Lazaro retired at age 65 with an annual salary of $150,000, he would need at least $120,000 a year to cover his expenses. If Mr. Lazaro expects to live for another 25 years, he needs a minimum of $3 million to safely maintain his lifestyle. Do the math in your own circumstances and determine how much you need. If you are new to the workforce, think about your lifestyle aspirations and work toward them. Time is your friend when saving for retirement, so don’t waste it.
- Think long-term. A well-prepared retiree works to see the big picture. While you may have done the basic math, don’t discount life’s extras. Do you plan to stay in your current home? Will you ever need another vehicle? How often will you travel? Have you earmarked funds for emergency expenses? Retirement planning should include necessity and recreational spending. Pay attention to your finances and credit today to plan for the events of tomorrow. While nothing is certain, a solid retirement portfolio is the best safeguard.
- Get credit repair help if required. Credit repair law firms like Lexington Law may be able to assist if your credit reports are less than stellar which can, in turn, result in lowered credit scores and higher payments for things as diverse as auto insurance and consumer credit interest rates. Holding the credit companies accountable may result in demonstrable personal finance gains.