
Retirement is inevitable that is why there are smart financial moves you can do now to help you create the life you want in retirement. The quality of life you will have in retirement will depend on how much work you put in now. The better you can plan for your golden years, the more you can retire to a life that you want.
According to CNBC, most Americans want to retire at age 67. But you have to remember that not everyone gets to retire when they want. Some are forced to work well into their retirement years. This is because they simply do not have enough to support themselves financially. Others cannot even begin to think about retirement believing they will simply have to work the rest of their lives.
This is exactly why you need to make smart financial moves early on. It will help you plan for your retirement early on. The better you can plan for it, the more you can live the kind of lifestyle you want in your golden years. If you are serious about your retirement planning and you want to get a head start with it, here are a few tips to look at.
Moving into a small house in retirement
One of the smart financial moves you can explore when you retire is your housing situation. Particularly, you can look into the possibility of moving into a smaller house. There are retirees who are picking up this lifestyle they refer to as the tiny house movement. It might seem a little extreme but it does have its benefits.
This move benefits your finances because it helps you deal with lower utility expenses. A smaller house would need less of almost everything from water to power. This already is a big win for you. You might even consider going solar which can drastically reduce your bills. There is also a chance that taxes and insurance can go down as well.
The house is also easier to maintain which is a good thing when you get older. No sense having a 4-bedroom house when you are an empty nester. One thing you have to keep in mind is timing. Buying a small house without selling the big one leaves you paying for two properties. On the other hand, selling your current big house but failing to close on the small property can leave you without a roof over your head.
Setting up a business long before retirement
There are a lot of things you can do in retirement and one of the smart financial moves to consider is running your own business. You get to be your own boss and dictate your own hours. If you choose to put a business around a hobby, you are practically getting paid to do what you love to do. That is something not a lot of people are able to pull off.
When you choose to define your retirement by managing a business, you might want to consider trying it out early. Try getting into it slowly years before your retirement date. For one, it helps you gauge the potential of your business idea. This also gives you enough lead time to work out the intricacies of your chosen business.
There is also a good chance that starting this business would incur start-up cost. That is an expense you do not want to take on in retirement. But if you start with it earlier, you could have the funds to cover the start-up cost. As you manage and try to build up your business, you might also encounter some losses. You stand a better chance of recovering financially if you still have a regular paycheck. Start with your business plan early so you can learn the ropes ahead of your retirement date.
Creating a strong reserve fund
One of the biggest lessons this pandemic has taught people is to have a reliable reserve fund. Now imagine if you were already retired, you did not have an emergency fund and the health crisis hit. You might be dipping into your retirement fund more than usual just to make ends meet. Worse, you could be selling assets you worked hard for over a long period of time just to have the money you need.
This is the reason why creating and setting aside a strong reserve fund for your retirement is considered one of the smart financial moves you can make. If you are able to do this, it allows you a better financial response in times of crisis. You lower the need to sell assets, borrow money from family, or even get into debt just to buy essential needs.
One of the thoughts you might have to entertain if you find a great need to augment your finances in your golden years is to come out of retirement. You might have to go back into the workforce just to make ends meet. This should be reason enough to help push you in saving money for emergency needs in the future.
Saving for retirement early
One of the smart financial moves you can act on now as you prepare for retirement is to choose to save early. If you can set aside money for your retirement needs from your first paycheck, then do it. Some people might struggle with it because they believe retirement is still too far into the future. They have not even settled in with their first job and now they need to start preparing for their golden years?
It also does not help that they might want to focus on paying down their student loans. This is a heavy financial burden to carry for a lot of people. But one thing you have to keep in mind is that your goal is to create a habit. A habit of saving for your retirement does not need to start with a huge amount every month.
Start small and work your way up as your pay increases. When your income goes up, your savings should go up as well and not your lifestyle. Once you have this habit in place, saving for your golden years becomes automatic. You let your savings and investments grow over the years so you can retire when you want to, not when you need to.
Retirement planning mistakes to avoid
Now that you have a better idea what you can do to help you plan for your retirement, it also helps to understand mistakes that can pull you further away from your goal. Here are some of them you can look into and avoid.
No clear financial objective
It is imperative that you have a clear financial objective when planning for your retirement. You can’t just pull a number out of thin air and decide that it is the amount you need to save up. Remember that to come up with your retirement goal, you need to understand first what you want to do when you actually retire.
If you plan to simply stay put where you are and volunteer your time to different organizations, then you can save up for that lifestyle. But if you want to go and travel and see a lot of different places while you are retired, then you might need to save up for a bigger amount. The idea is to figure out what you want in retirement so you can save up for that exact lifestyle.
Too much debt into retirement
Pew Social Trends share that about 83% of people believe they might have to work well into their 70s to afford retirement. One of the reasons why a lot of people need to work past their desired retirement age is debt. This happens when your debt obligations are more than what you can repay prior to retirement. Remember that the goal is to get to retirement without too much debt under your name.
This is for the simple reason that if you have a lot of payments entering retirement, most of what you saved up would simply be used to pay them all back. You might not have enough at the end of the month to live the life you want. This is why it is a good idea to try and pay off as much debt as you can prior to retiring. This ensures you that you get to enjoy your money and not use them to pay back lenders.
There are smart financial moves you can start implementing now to help you get the kind of life you want in retirement. The earlier you start planning and saving for your golden years, the more exciting it can be.