Ensuring income in retirement is a crucial part of being able to enjoy your golden years. Especially now that the world is trying to manage through a global health crisis. A lot of people are going through a difficult time as the pandemic forced several businesses to either slow down or completely close down operations.
Even before the pandemic, CNBC shares that people plan to keep working even in retirement. For most of them, it was because they simply do not have enough money saved for their golden years. There are people who might have started saving late in the game because they always put their retirement savings on the side.
It is challenging to even think of income in retirement when you are just starting your first job. At this point, retirement is decades away. It is also possible that priorities for younger people could be more focused on paying down student loans. Life plans also involve a lot of expenses such as saving for a downpayment on a house or even getting married.
Gallup shares that for most Americans, the average retirement age is 66 years old. Retirement is not a question of “if” but more of a “when?” Time always moves forward and you will reach your retirement age at some point in time. But when you do retire, you need to have an idea where the money will be coming from.
When you talk about income in retirement, social security benefits usually are the first source up on your list. The Social Security Administration shares that benefits can be availed as early as 62 years of age. Though you must know that if you wait until your full retirement age, your benefits and the amount you get can go up.
But one thing you need to understand is that relying solely on your social security benefits might not give you the type of life you want in retirement. It is important to complement your social security benefits with other sources of income when you reach old age. This will help you live the life you want when you reach retirement years.
One way to add to your social security benefits and have extra income in retirement is to identify a side hustle you can spend time on. One idea is to develop an income positive hobby which can be helpful in a lot of ways. The most obvious of which is that you get to earn extra money you can use in your retirement years.
Additionally, you also get to work on an activity that you already like. For a lot of people, it was a relief to finally retire from their day job. A side hustle should excite you and give you purpose but at the same time, keep you happy as well. A hobby you can earn from is a great way to combine all these things in retirement.
Income in retirement can also come from more than just a side hustle. If you have a talent for setting up and managing a business, you can set up your own business even in retirement. Of course, there are several business models now that can help you set up without incurring a lot of upfront costs. This is an important part of the process since you do not want to use up all that you have saved in setting up your business.
One of the best ways to start your business is to take advantage of technology. Explore how you can pattern your business into an online venture. This lowers the need to set up a physical shop or office. This is ideal since the pandemic has brought down stay-at-home orders for most states. And even as that is slowly lifted in some parts of the country, people have already seen the benefits of staying and even working from home. So a lot of your potential clients could be online as well.
How to prepare for retirement
These are just some of the ways you can create income in retirement but even before you get to that stage in your life, you need to prepare for it. Money is a crucial part of it but there are other aspects of your retirement you need to consider. Here are some of them to look into.
Have a concrete retirement plan
Retirement is an exciting phase in your life but you need to prepare for it as early as you can. The earlier you save up for it, the more options you have on hand. If you can start with an amount from your first paycheck, the better. You can start with a small amount so you develop the habit early on. You can increase the amount you save over time. The important thing is you create that habit.
When it comes to retirement, you need to have a concrete plan as well. In fact, this should come before you save money. At the very least, have an idea of what you want your retirement to be like. For some people, they envision a lot of travel because they want to see the world. Others prefer to buy a property near the beach and spend every waking moment with the sun on their face and sand in between their toes.
The amount you need in retirement depends on what you want to do when you reach your golden years. A concrete plan will help guide you through retirement savings. It can let you know how much you need to have by the time you retire. If you plan to travel, you need to set aside funds for it. If you plan to buy a beach house, you need to have an estimated amount you need to save to make that dream a reality.
Pay yourself first
Income in retirement has a lot to do with the initial planning and paying yourself first. When you start earning your own money, it is tempting to start spending on things you want. Buying a car, gadgets, or even splurging on the latest fashion items. Even with the pandemic, there are still a lot of temptations that can ruin your budget.
Before you spend on your wants, it will help you with your retirement plans if you pay yourself first. Consider your retirement savings now as an expense you have to pay for every month. Set aside the amount every month for your retirement and forget about it. Just like how you approach other bills and debt payments.
If the time comes that you start setting money aside for a 401k account, try to max out the allowable contribution every year. This will be helpful especially if you have an employer matching program. The more you save, the higher your employer puts in to match your savings. This is free money you need to take advantage of every single time.
It is important to know where you will get income in retirement especially if you are nearing your retirement target date. The times are tough as well with the pandemic making it a lot more challenging to retire. But if you slowly work towards your goal and keep at it, you will be able to reach your retirement target.