The average American spends two decades in retirement making it essential to plan properly and ensure you can support yourself and make the most of this time.
Figures from the Department of Labor, however, show that 30 percent of people do not even know how much they need to save in order to fund their retirement, let alone the insurance they might require. These same statistics also reveal than 30 percent of people working in a private industry who are able to pay into something like a 401 (k) plan, choose not to do it.
Choosing not to plan for retirement is a risky option that could lead to many years of unhappiness. If you have not considered it before, or if you are starting to think about it more, follow these simple tips to help guarantee that you can enjoy the retirement you deserve.
Protect Your Health and Your Family
Health insurance will ensure that you can have regular check-ups, which is essential as you get older, and will also make sure that you are financially stable should you need treatment. This can help protect your dependents, as will life insurance. The latter can help you ensure that your family is secure if something were to happen to you, or at least, cover the cost of your own funeral. Life insurance can also pave the way for you to take out tax-free loans to supplement your retirement funds – a cheaper option than other methods. Just remember that unpaid loans are likely to reduce death benefits, which should support your family or fund your funeral.
Ensure You Have Somewhere to Live
Think about where you will live when you retire. Many people have plans to downsize and use the funds to help pay for their living expenses. It is important to remember, however, that moving home costs money and this expense can sometimes outweigh the benefits gained from downsizing.
You may be in the fortunate position where your home loan will have been completely, or almost, paid off by the time you retire. If not, you may consider the possibility of buying a property for yourself to avoid the uncertainty of rentals or to invest in a larger home that would allow you to live with family. This is not an option for everyone and it can be more difficult to get a mortgage as you get older. There are ways to do this, however, and it is actually illegal in America to be refused a mortgage based on your age under the federal Equal Credit Opportunity Act. You are eligible for a home loan if you have the income to make the repayments. There are examples of people in their 90s being approved for loans! If you are part of a couple, it is important to consider the implications if one of you were to die before the loan was repaid, and to make adequate provisions to ensure you are financially secure should this happen.
It is also essential that you continue to protect your home and its contents against theft and damage. Home insurance can ensure that even if the worst should happen and your home was burglarized or suffered a fire or unexpected flood, you would not have to dip into your retirement fund to pay for repairs or for somewhere else to live.
Long-term care insurance is another important consideration to look after yourself and your family should you – or someone you love – need nursing care. This will also protect you should the unthinkable happen and you suffer an ailment that requires long-term care. It may seem morbid, but investing in this kind of insurance can actually be a positive move – ensuring that you and your family are not hindered by financial worries and you can make the most of the hand that you have been dealt.
Know Your Needs
You will probably need between 70 and 90 percent of your total pre-retirement income to ensure that your standard of living remains the same. That is why it is essential to work out how much you need and how this is achievable. If you have not really considered your financial future before, this can seem like a daunting task, but it is never too late to start saving and planning. Take control of your retirement and do all you can to make it as comfortable as possible. Help is at hand from the likes of the Department Labor, which has a range of guides that can help you on the road to greater financial security.
It’s Never Too Soon
It may be tempting to ignore employers’ offers of joining a retirement savings plan when your retirement seems like a lifetime away, but this can be a costly mistake. There are tax benefits to be had and deferrals and compound interest can make a huge difference to the amount you can accumulate. Thoroughly check the details of any traditional pension plan your employer has available and keep track of pension benefits from previous jobs. If your current employer does not have a retirement plan, suggest they start one.
Keep Abreast of Investments
Ensure you will have the most funds available for your retirement by keeping track of investments relating to your savings or pension plan. Do not be afraid to diversify and have fingers in many pies to minimize risk and maximize returns. Also, do not be tempted to dip into your retirement savings. Not only will you reduce your pension pot, you may also incur withdrawal penalties and lose tax benefits and interest. If you change employers, leave your retirement plan as it is or roll your savings to your new employer’s plan or an IRA. Individual Retirement Arrangements (IRAs) offer tax advantages and allow you to contribute up to $5,500 each year – and even more when you reach the age of 50 or older.
By: Emma Kilburn
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