Retirement is usually one of the most important aspects of our lives. But how do you prepare for your retirement? You may be thinking that you are still too young to think about this right now, but that is not true. As soon as you start working, you should start preparing. Here are five ways you can begin preparing for retirement to ensure a stress-free old age.
1. Start Saving
The retirement age in most countries is mostly 60. But if you think you have 10 to 20 years before you retire, you should start saving immediately. When you retire, you stop earning. But if you have saved well, you can live off your savings for years. Saving will also keep you responsible and away from trouble that may affect your productivity in your younger years.
With enough savings, you are also sure that you will not struggle as you have secured your future. That way, you are sure you have enough money to do anything you want in your retirement days without much hassle. If you have not been saving, make sure you open a savings account. That will help to ensure you always have a certain percentage of your income that you send to that account instead of mixing up all your money. Consistently doing so will enable you to have the needed discipline to have a huge amount of money saved up by the time you are retiring. Therefore, if you can, try and start saving as early as possible even if you are still in your 20s because retirement will come knocking sooner than you think.
2. Pay Your Debts Early
Retirement spells an end to years of financial uncertainty. But what if your retirement gets postponed because you have too much debt? Paying off your mortgage early can give you financial freedom for life. Contrary to popular advice, repaying your mortgage early is not likely to make you poorer in retirement. Rather, by freeing up cash flow, you could improve your retirement prospects.
While retirement is always something that we assume will come and we can slowly and methodically plan for, the fact of the matter is that it can come up quicker than we may think. Therefore, ensure you settle your debts as soon as you can. Doing so will help ensure that you can enjoy some peace of mind during your retirement and also have more money to invest.
3. Find a Convenient Place to Live
Finding a convenient town or city where you will stay after retiring to Auckland New Zealand is also crucial. Look for a place where it is easy to shop, travel to new places, and easy to get the medical care you need. Since finding a perfect place can be quite tricky, start researching for suitable places right now.
When looking for a place to live during your retirement days, ensure you consider the housing cost of that area. You definitely don’t want to live in an overly expensive area that will eat up all your money in no time leaving you struggling. If you can, try and buy a house with some of your savings. Doing this will make sure you eliminate some bills such as rent that can be such a huge pain in the neck in your old days when you are no longer employed.
4. Meet with a Financial Planner
Working with a financial planner is vital, especially if you are not used to managing lots of money or just have poor financial skills.
When picking an expert, make sure you understand all the fees involved. Does your financial planner get a commission on the investments he recommends? Does he charge by the hour? Does he charge for advice on the phone? Does he charge for a consultation? Will he charge extra for complicated financial arrangements?
Reading stories from websites like Pension Times can help save you money and ensure you get suitable advice. To be on the safe side, make sure to do some research prior to hiring a financial planner. Doing this will help to determine whether they are professional enough, qualified and how they handle their clients. If they are a renowned firm, you might find some of their customer reviews online describing their experience.
You can also check their license, certifications, and other essential information to know if they’re legitimate and trustworthy. If possible, you can interview at least three prospects to get to know them better. During the consultation, you can ask them about their financial planning approach, the number of clients they’ve worked with, and their fee structure. With that, you can now decide whether they are a good fit for you.
5. Build Your Asset Base
Retirement is an opportunity to build on that asset base. So, you need to start buying assets. Some of the best assets to invest in are real estate, stocks, and bonds. Investing in any of these will help ensure your money keeps growing for years. For example, you can buy a rental property to generate a stable income for your retirement. Just make sure to compute the potential costs you may incur if you plan to invest in a rental property.
On the other hand, if you want an investment that doesn’t require your active participation, then a dividend income fund may be an excellent option. This fund has managers who manage the dividend-paying stocks for you. Like a rental property, dividends can also give you a good source of income in preparation for your retirement.
Indeed, there are many investment options to choose from for your retirement plan. Although some of them require a considerable amount of capital, there are other investments that don’t require a large sum. If you don’t have much money, you could just start with one and then move to the other after a while. However, make sure you do proper research on any asset you want to invest in because each of them has risks. It is crucial that you understand those risks and their rewards, so you can know what you are getting into.
6. Take Advantage of the 401k Plan
The 401(k) is one of the least understood financial tools. It is regularly described as “old-fashioned” and “unsexy.” Yet it’s one of the most important features of capitalism.
Your 401(k) is a type of retirement plan. It lets you invest part of your salary in stocks, bonds, mutual funds, or other investments. When you leave the company, you take the money with you, and you can use it to buy your first house, buy a car, or retire.
Most people don’t have 401(k) plans, since about half of private-sector workers don’t have any form of retirement plan at all.
A 401(k) plan usually has two parts: a retirement account and an investment account. Your retirement account is made up of money given to you by your employer.
The investment account is your money. Your employer gives you enough money to invest. Then you decide how to invest this money. You can invest in one type of investment, such as stocks or bonds, or you can choose to invest in several different kinds of investments.
You keep the money invested until you retire. Then, you start withdrawing money from your account. You can choose how much to take each year when you reach age 65.
7. Reduce Living Expenses
The money you use on yourself each year is called your living expense, and it’s crucial that you always keep it low. So, your living expenses are the money you spend on food, shelter, heat, electricity, transportation, medical care, insurance, taxes, and all the other things you need from life.
Expenses are hard enough to cut; with living expenses, it’s almost impossible. To save money, you have to give up things you want, like leisure activities. If that sounds scary, it can be. But it doesn’t have to. You don’t have to give up everything. Just the things you don’t need. Therefore, you need to be honest with yourself and determine some of the things that you feel you can survive without. For instance, you don’t need to go out every weekend. You can be going out at least once a month. That can help to save some of the cash that you usually spend every weekend. When you do this for at least a year, you will see how much money you will have saved and it will motivate you to keep going.
Conclusion
Retirement can be both a good or bad thing depending on how much you have been preparing for it. If you haven’t been preparing, you will obviously feel shaken by even the thought of retirement. Fortunately, this article has excellent tips that you can apply to help you to be fully prepared for your retirement. Therefore, make sure you apply all of them if possible to ensure a better retirement plan.
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