Retirement should involve transitioning into a more relaxed lifestyle and enjoying the spoils of your hard work. That said, many people feel anxious about approaching the age of retirement and have concerns about how they are going to afford to live without an income.
Preparation and planning are key to enjoying your golden years. Luckily, there are some steps you can take to ensure a comfortable and happy retirement. Here are five tips that will help you feel financially secure when you retire.
1. Calculate your ideal retirement income
Your first retirement planning task is to calculate how much money you will need to retire. Look at your day-to-day expenses to work out your ideal retirement income. You can use a free online retirement income calculator to help you determine what your current retirement contributions will provide you in retirement.
Make a note of essential expenses such as rent or mortgage (if applicable), utilities, food, medical care, insurance, and so on. Then, write down your non-essential expenses like entertainment, clothes, hobbies, travel, etc. Add these together to work out roughly how much money you will need each day/month to live comfortably in your retirement.
Keep in mind that you will need more money if you plan to travel or move abroad when you retire. Many people relocate to retirement hotspots in the UK that offer senior-friendly amenities and activities. If you are planning to relocate when you retire to one of these fantastic destinations, then factor the cost of this into your retirement savings goal.
2. Start saving as early as possible
If you want to enjoy a financially secure retirement, then you must start saving as early as possible. According to advice on fidelity.com, “you should aim to save at least 15% of your pre-tax income each year for retirement.” However, you may need to save more than this if you plan to retire early or want to enjoy a luxurious lifestyle in your retirement.
The earlier you start saving, the more time you have to build your retirement fund. Saving for retirement may not be a top priority, especially if you are decades away from retirement age. However, putting extra money into your retirement savings will benefit you massively in the future and put you in a stronger position financially.
3. Increase your retirement contribution
Many employers offer a 401(k) pension scheme where they agree to match your monthly pension contributions. If your employer offers this, then make sure that you take full advantage of the benefit by maximizing your monthly contributions.
For instance, if you are currently depositing 10% of your gross income into your pension pot, then consider increasing this to 15% so your employer will match it. This is a simple way to boost your retirement savings and increase the amount that you will receive from your employer.
4. Slash your monthly expenses
One of the easiest ways to build your retirement savings is by reducing your outgoings. Practice smart spending habits and look for ways to slash your monthly expenses. Do an honest evaluation of your spending and identify things that you can cut back on. Simple changes to your spending habits could save you thousands of dollars each year.
A survey by NextAdvisor found that you could save between $1,000 and $2,000 a year by making coffee at home instead of heading to Starbucks every morning. You can also cut back on your monthly expenses by shopping at a cheaper supermarket, switching to store-brand products, and canceling unused subscriptions and memberships
5. Make wise investments
Investing can be an excellent way to build your retirement fund and maximize your hard-earned savings. However, investment always comes with risks, and you could lose money if you make the wrong decisions. If you want to invest some of your retirement savings, then you should contact a financial planner for professional advice and guidance.
There are several different options when it comes to investing your money, including stocks and shares, mutual funds, and real estate. Most people chose to put their money in low-yielding investments to minimize the risk, although high-risk investments typically provide better returns. Do your research and follow the advice of a finance expert.
Your retirement should be a joyous time when you get to relax, spend quality time with family and friends, and pursue your hobbies and interests. However, you must plan your finances and start preparing for retirement early if you want to enjoy a comfortable lifestyle when you stop working. These tips will help you feel financially secure and enjoy your golden years to the fullest!