No matter where you are in your career, the potential of eventually retiring can be a daunting experience to think about. Are you saving enough for the future? If you are, when will you have enough money set aside to be able to retire? The list of questions goes on and on. Even though the thought of losing your steady income by retiring can be intimidating, you can start planning today be better prepared for when the day comes. Here are five things that you should know while planning for retirement.
Where You Want to Go
Knowing where you want to be during retirement plays a big part in the amount you should be saving. Are you planning on moving to a beach house? Do you want to settle down in a quiet rural community? Even if you’re staying where you are now, you should plan for a house payment and the cost of living in the area.
For many retirees, the chance to see the world is far too appealing to let it pass by. If you feel that you’re going to catch the travel bug during retirement, make sure that you’re going to have the money in your bank account to fund your globetrotting. You can even get started years in advance by planning these trips to get an estimate of how much your travels will cost you.
What You Want to Do
Know what you want to do with your free time during retirement. Whether you’re going to spend your time learning new hobbies, perfecting old ones, or simply hanging out with grandkids, it’s important to know what kind of funding you’re going to need. Once you have an idea about what you want to do, you can start to budget your spending accordingly.
Some people are busybodies, which is OK. Whether it’s because you want to keep yourself busy or you want to continue to bring in the money each month, it’s not uncommon to cut your hours down to part-time. This is not only a great method of supplementing your retirement fund, it’s an excellent way to make sure that you’re keeping yourself physically active.
Your Financial Options
The most common retirement fund that we hear about nearly every day is a 401(k). If you’re paying into this account over the years, it will mature when you turn 65 and could have a good chunk of change ready and waiting. Should you choose to keep working beyond 65, you can continue to pay into it as long as you’d like.
Similar to a 401(k), you can contribute individually to a traditional or Roth IRA each month. While you can continue to contribute to a Roth IRA as long as you’d like, you must start withdrawing from a traditional IRA once you reach age 70.5. Understand the benefits and limitations to the accounts where you have money so that there are no surprises when it comes time to access the funds that you need.
If you worry about the amount of money that you have saved for retirement, you can get a lump sum (or monthly payments) by taking out a reverse mortgage once you reach age 62. This allows you to leverage the equity in your home as income. Learn more about requirements for eligibility and real-time interest rates by using a reverse mortgage calculator.
Ways to Supplement Your Savings
Even in retirement, there are plenty of ways that you can supplement your savings without working at a brick-and-mortar part-time job. If you’ve played a musical instrument much of your life, you can share the knowledge that you’ve gained by teaching lessons. Many children want to learn how to play any number of instruments or sing and their parents are willing to pay good money for someone to teach them. Not only does this make for a good source of supplemental income, but you can also decide your availability and make your own schedule.
As your home empties, you’re likely to have some extra space that’s going unused. Whether you have a spare bedroom or an empty basement, you can rent it out to tenants to help bring in a lump sum of monthly income. Yes, you will have to manage the rental space with things like maintenance, but that’s what a security deposit is for, right?
What to Do With the Unexpected
It’s no secret that medical bills are inevitable during retirement. As we age we’re going to need to see the doctor more often, get preventative medical screenings, and probably pay for prescriptions. Most of these medical bills can be planned for, but there are others that come pop up unexpectedly and quickly drain your savings account. Have a plan in place to pay for medical coverage as needed so that you don’t spend your life’s savings on a single medical treatment.