Your retirement funds will be your lifeline when the time comes that you walk away from your corporate life and decided that you want to take it easy in life. THis will be your source of funds because you will usually not have a job to speak of. You will be able to pay for your living expenses and other needs from the funds that you have saved up.
There are a lot of retirement factors that you need to consider and a lot has to do with how you prepared for the day you will retire. You usually work your way backward and establish the age at which you want to retire which according to Gallup.com is at 62 years old at the average. After you have established your ideal retirement age, you then sit down and do some computations.
You look at how much you would need come retirement time which should cover your living expenses, medical expenses and even travel money if you plan to go around and visit other countries. After you have rounded off that number, you then figure out how much you should be saving every year to get that amount come retirement time.
But there are instances when you might not be able to reach your goals because of lack of planning. One of the biggest hurdles of young consumers nowadays is that they do not think of retirement early on because they are just starting out. Pooling in a significant amount from their income and allocate that as part of their retirement funds is not top priority early on.
How to manage the lack of retirement money
Lack of early retirement and budget planning can lead to a shortage in the retirement funds. This is a dangerous situation because trying to put in more to your fund as you get older becomes more challenging. Not to mention that the compound interest on your funds will not work to your advantage anymore when you out in more into it closer to the time when you need it. But if you face this problem, here are a few things you might want to look into to manage your retirement money.
- Can you increase your allocation for your retirement fund? Even if compound interest will not work best if you put in more at the end, you still need to put in as much as you can into it while you still can. If you have been keeping debt at bay, you might be able to put in a lot more to your retirement funds and try to keep it there for as long as you can before you use it.
- Are you open to extending your target age of retirement? If you still do not have enough in your retirement money and you are getting closer to your retirement age, it might be a good idea to extend retirement for a few years until you get to your target amount. You can still stay in your current job and max out your annual contributions in your 401(k) to make sure that you are maximizing the tax-advantaged tool. You can also increase your other investments to make sure that you have enough when you stop working.
- Can you continue working for less hours? It is also possible to continue with you current work even at an old age but cut down on time. This can help you get in a steady income into your budget and help you cover your daily expenses as you wait for compound interest to do its number on your investments.
- Will you consider downsizing your house? This is a growing trend with some retired consumers because the lure of a smaller house brings lower expenses compared to maintaining a big house. But with this trend, CNN.com explains that retirees need to sell their current place first before going ahead and signing off on a smaller house. This is because you might end up with two mortgage payments if you do not ensure that your big house is sold. Having a small house can mean lower living expenses, lower mortgage payment and more importantly, smaller homes are easier to manage and clean.
- Do you want to retire in another country? One way to handle shortage in retirement funds is to bring what you have and relocate to another country where you can stretch your dollars. The idea is to look where your dollars will have a bigger value in that country’s currency. It will help you stretch your retirement fund and even learn a new culture in the process.
Tips in retirement
One of the biggest retirement regrets of consumers is not planning early for their retirement needs. Here are some ways on how to make the most of your retirement funds and some valuable tips people might not be telling you.
- Exercise and keep your body healthy. Statisticbrain.com explains that a retired couple who are over the age of 65 would need about $218,000 for medical treatment for the next 20 years. One way to mitigate this cost is to keep your body healthy. Medical costs will take a big bite out of retirement funds and doing some regular exercises and watching what you eat can help lower down the cost.
- Keep your brain active as well. It might not look much but when you spend your retirement in front of the tv eating cold dinner and an even colder beer, you might slow down mentally. One way to combat this is to read books to keep your mind alert. You can also play chess or other brain games to keep your mind challenged.
- Spend time with family and friends. Emotional connection with your family and friends can help you feel good about yourself and make you forget problems in your life. You also need the support system of these people in retirement.
- Do not be afraid to follow your passion. Age is just a number and you should not forget the things you love to do. If you love photography then include that in your retirement plans and maybe you can even earn a few money on the side. You can sell your photos online or even set up a home studio for product shots for advertising agencies.
Retirement should be an exciting part of your life because you get to have more time doing the things you love and you do not have to think about getting up early in the morning to leave for work. You can focus on the things you love to do. It can be woodwork or even get started on writing that book you have been trying to put together for years.
One thing you need to have a lot of are your sources of retirement funds to tide you through your expenses in your retirement years. More than covering your living expenses like food and even utilities, you need enough funds to cover your daily activities. If you did not plan well for your retirement or even started late in the game, chances are you might be running short on your retirement nest egg. You do not have to worry because there are some tips you can look into to help make sure that you are able to stretch your money to cover your needs.