It is critical to prepare for your retirement no matter how far off this life event may seem. However, not everyone is adept at identifying how much they will need in their savings to enjoy their golden years. In fact, the Center for Retirement Research at Boston College revealed that 20% of households are not correct in their projection of when they will be prepared to retire. Thankfully, there are several of steps that one can take in order to ensure that they are ready for retirement, no matter when it may come. With that in mind, let’s take a look at the four tactics you should employ in order to retire comfortably.
Determine Your Retirement Budget
Firstly, you will want to determine what your retirement budget will look like. What kind of activities will you want to take on? Would you like to travel? Are there any medical conditions you need to prepare to treat? Answering these questions honestly will give you the best chance of adequately preparing for any of life’s road bumps.
Once you have determined your retirement budget, put it into practice as best you can for at least six months. Doing so will give you a greater understanding of how you are going to follow this budget and incorporate the activities you want to take on.
One of the worst things you can do is enter retirement with large amounts of debt. So, before you decide to call it a career, make sure you pay off any high-interest debt to avoid making these payments after retiring. In an ideal situation, your mortgage will be paid off, all student loans will have been put behind you, and you will own your car outright. Also, if you use credit cards, be sure to pay the balance every month. If you stick to only paying the minimum, you will likely remain in debt for years to come.
Many people who think they are living frugally usually are not. Think about how often you dine out, or if you get a cup of coffee every morning before work. How much do you spend on clothes and other non-necessities? All of these expenses will add up. Therefore, you should take a look at everything you spend money on and make a cost-benefit analysis to determine whether or not these expenses are worth the investment.
As you are cutting your expenses, think about the opportunity costs. For example, if you are an entrepreneur who would make more money by using your time for work rather than do your own landscaping, then, it would make sense for you to hire someone to take care of that for you.
Consider All Sources of Income
Now, usually, your retirement income will come from a combination of your employer-matched retirement account, personal savings, and Social Security income. So, you should compare what you are eligible to receive with what you will actually need.
If you find that you are coming up a bit short, then you should consider every option available to make it up before you retire. Perhaps you could consider working part-time. Or, if you have a marketable skill, you could try to take on freelance work that can provide enough income that meets your needs without having to dip into your retirement savings.