Approaching retirement can be exciting, but it can also provoke anxiety. After all, many people feel underprepared financially to navigate their retirement years in peace.
The good news is that it’s not too late to put a plan in place. Even taking a few small steps today can have a big impact when the period finally arrives. In this post, we’ll outline a few easy-to-follow tips that can give you more confidence that you and your family’s financial future is secure.
Assess Your Financial Readiness
One of the main reasons why so many people approaching retirement feel anxious is because they’re not fully sure of the position they’re in. Taking some time to understand the position you’re in can help to allay concerns or give you time to make improvements now, while you’re still in the workforce.
It’s a good idea to calculate all your projected incomes, such as the amount you’ll get from your pension/state benefit, and your savings. Ideally, that figure should be around 20 – 25x your annual expenses. It can be a little nerve-inducing to confront your financial reality, especially if you think you haven’t saved as much as you could have, but it’s always better to know what you’re dealing with.
Audit Your Spending
Many people have an incorrect idea of how much they spend and where. Taking stock of your spending habits today can help you cut unnecessary expenses, which you can then use to top up your savings account.
To do this, take a close look at your bank statements for the past few months. You might find that you’re spending a small fortune on takeout food/coffee, or that you’re paying for subscriptions that you no longer need.
Have a Plan For Expected Costs
Some costs — such as commute costs — disappear in retirement, but there are some costs that rise. Even though you don’t need them immediately, knowing how much will a funeral cost, the cost of assisted living residencies in your area, and how much your healthcare policy will cover will ensure that you’re ready when they are needed. Having this information early also gives you an opportunity to take action — such as increasing insurance coverage — if necessary.
Create An Emergency Fund
Growing your emergency fund both gives you peace of mind that you can cover unexpected costs, as well as helps you to protect your retirement savings. Those financial emergencies, such as urgent house repairs, don’t stop once you hit retirement — in those moments, it’ll be your emergency fund to the rescue.
Clarify Your Retirement Goals
Finally, take some time to think about what you want your retirement to look like. While there are ballpark figures thrown about when people discuss how much you need for retirement, the truth is that how much you need will depend on your specific goals. You’ll need more money if you’re planning to travel the world, less money if you’re planning on living in a small town, in a home that you’ve already paid off.
