Planning one’s retirement is a multi-step procedure that changes with time. Younger investors like some of you can take more risk with their investments, whereas investors that are closer to the retirement threshold need to be more conservative.
Here you will find five steps we should all take irrespective of age to construct a solid retirement blueprint.
1. Determine Your Retirement Spending Needs
Having genuine expectations about your post-retirement spending lifestyle will help you outline the essential proportions of a retirement portfolio. Some people are of the opinion that after they retire, their yearly expenditure will be about 70% to 80% of what they previously spent. Such supposition is often demonstrated to be impractical, especially if your mortgage hasn’t been paid off or if some unexpected medical expenses ensue.
“The cost of living increases yearly— most especially healthcare expenditures. People are enjoying longer lives and want to flourish in retirement. Retirees need to earn more for a longer period, so they can save and invest with ease.”
2. Leverage Home Equity
In today’s housing market, countless senior homeowners are leveraging their home equity via a reverse mortgage. These loans are largely used to cover expenditures while retirees defer their social security benefit entitlements. Nevertheless, homeowners should think before following this option, as the future costs and risks of a long-term loan might offset the benefits of a superior social security check.
3. You Need To Change Your Spending Lifestyles
Before activating your retirement plan, you should be thinking of maximizing your savings by reducing your monthly expenses. There are some strategies you can use and they include:
- Working on a methodical debt reduction policy that will offer long-standing cost savings. We commend that you put excess funds towards the payment of your high-interest loans pending when the outstanding amounts are entirely paid off. Then move towards the next highest unpaid balance.
- If the relationship you have with your finance provider is strong and you possess a good credit score, then you need to call your credit card agency or bank to see if they can refinance the terms and conditions of your loan. Just so you know, a few percentage points can be the game changer.
4. Go For For Annuities
Annuities are among the most flexible and secure retirement savings products available on the market. An annuity is basically a contract which guarantees the principal protection of clients and the options for a fixed-rate of returns for life. Annuities provide a lot of benefits over other possibilities. Some examples of annuities are monthly home mortgage payments, consistent deposits to a savings account, monthly pension payments and insurance payments.
5. Consider The 4% Rule
This rule states that, if you withdraw a maximum of 4% of the total value that you have in your nest egg yearly, you will be able to keep your savings in one piece for up to 30 years. You can still increase the withdrawals annually to account for price increases. You should also take the low-interest rates and market volatility into consideration because it may decrease the estimated returns on your savings, but so long as you are monitoring the economy, your investment progress, and total spending, the 4% rule will provide a handy recommendation for future withdrawals.
In general, everyone will love to retire with a big fat bank account but to achieve it, you will need to reduce your living costs and make some investments especially when you plan to close the retirement income gap