As you age, your finances become increasingly important since you’re nearing retirement. Retirement is a time when it’s valuable to know you have a comfortable pile of money to rest on and pass on to the next generation. Since there are a lot of variables, retiring can seem complex and overwhelming at first glance. After planning for these three key factors, it should all seem clearer.
1. Savings and Expense Planning
First, you must get a grasp on your current situation and your retirement goals. Have a look at your current budget and tweak it to visualize all the ways your expenses might change after you retire. Factor things in like insurance, housing costs, food costs, and spending money. This is to more accurately calculate the amount you’ll need in the bank for the number of years you anticipate being in retirement. It’s better to shoot too high than too low!
In order to save the largest amount of money possible, consider cutting your current unnecessary expenses to add to your savings. Cut out any unnecessary subscriptions or high-interest debt as soon as possible. A dripping faucet can waste 3,000 gallons of water per year. Bear this concept in mind when it comes to your finances.
Make a target percentage of your income to set aside that will keep you on track for your long-term goals. If this all seems like too daunting a task, consider hiring a professional financial planner. 95% of people who have one believe it’s worth the money. It is very wise to make intelligent investments in stocks, bonds, or other assets in order to grow your savings. Also, be sure to consider the tax implications of the way your savings are set up, or else you might not have the amount you expect when the time to retire comes around.
2. Estate Planning
It is important to have an advance directive as you age. An advance directive should generally include a will, appoint a power of attorney, and appoint someone to make healthcare decisions on your behalf at the very least. A power of attorney is someone you give legal authority to make financial decisions for you and your estate if you become incapacitated. They should be someone you trust, preferably someone with no motivation to wrong you.
It is vital to use tools such as a will or joint ownership structures to plan out your asset allocation. Otherwise, assets may be given to the state by default when you pass, and your dreams of leaving your money to your kids or to charity will go out the window. Did you know that only 37% of American seniors have an advance directive in place for end-of-life/healthcare planning? This means that many of these people’s last wishes won’t be met.
3. Healthcare Planning
Health issues are a common part of aging, and it’s important to be prepared for them. Preparations depend on your unique circumstances, just like everything else in retirement and life at large. As was mentioned earlier, it is important to designate someone you trust to make healthcare decisions for you in an advance directive. Also, it is wise to have the type of care you prefer in writing. Be sure you have adequate insurance or money set aside to cover unexpected short- or long-term healthcare costs.
All in all, retirement is an exciting time in a person’s life to explore and live freely. In order to see the results you desire, pay careful attention to the intricate details of your affairs and finances and plan ahead for potential issues in the working years leading up to retirement.