7 Steps to Make Your Retirement Security Stronger
You can not ignore the importance of retirement security being a common person. By securing your retirement you may live a stress-free life without worrying about your coming days. It is good to plan early when it comes to ensuring your retirement days financially. But you can assure that you’ll have that time or the luxury to prepare it. So, the financial decisions you might consider in the years approaching your retirement will decide how much financially secure your retirement will be.
Practically, you’ll take financial decisions while living your daily life, and those decisions will have an impact on your financial future to lower your risk and increase your retirement fund.
Here I am going to point out a few financial steps that might help you to boost your retirement security.
“As in all successful ventures, the foundation of a good retirement is planning.”
Earl Nightingale
1. Maximize your retirement fund by increasing contribution
You need to start contributing to your retirement funds from the very beginning of your career. By doing that you can actually increase the chances of getting a secure retirement life. Retirement account comes with tax saving benefits. So, whenever it is possible, take full advantage of tax deductions by contributing in a retirement account.
But you might ask - “From where to start?” You may choose a traditional IRA or consult with your employer to contribute to your employer-sponsored plan. Apart from that option, you may also contribute to a Roth IRA. A Roth IRA can be funded with your post-tax income, and once you choose this option, all future withdrawals that follow Roth IRA regulations will be tax-free.
So, start saving and contribute as much as possible into your retirement savings account.
2. Arrange income sources for retirement
“The question isn’t at what age I want to retire, it’s at what income.”
George Foreman
A strong retirement plan must include the specific income sources that may provide you a steady income stream even after you stop working. As per the situation you face in different stages of retirement, you may anytime change your income sources. You may usually consider pensions and retirement account withdrawals as your main income source. Apart from that, being a retiree you can also include income from rental real estate, short-term investments, or income from assets as your additional income source.
But you must always focus on finding a steady income stream that can match your spending behavior. It is better if the income source can provide you more than what you spend in a month. That excess income may help you to manage emergency expenses in a month. Remember, the more you can earn, the more you can save for special events or emergencies.
3. Pay off your debts before retirement
Carrying huge debts into retirement is devastating for your retirement. IN your retired life you would like to live a better, hassle-free life using your savings. But if you have high-interest debts like credit card debt or payday loans, most of your saved money may go toward making monthly debt payments.
Your life after retirement will be much more secure if you can cut off your debt payments before getting retired. Removing payment obligations per month after retirement will help you to save a good amount. You may use that amount to pay for your kid’s education, use it for short-term investments, buy a new car or home for your family, etc.
To be on the safer side, you may opt for debt consolidation and consolidate your high-interest debts. Most of the Americans are suffering from credit card debts and payday loans. So you should also first consolidate credit cards or payday loans, before tackling other unsecured debts. By taking out a low-interest personal loan, you may pay off all the unsecured debts you have, with a better payment plan. Don’t forget to pay off the personal loan on time and improve your credit score.
4. Downsize home considering your needs
Being a retiree, if you need your big, current house for the long-term purpose, and the home is paid off fully, it is best to stay there as long as possible. But, if you don’t need such a big house, and the maintenance/utility cost is too high to afford, you may consider the option to move on. Paying high housing costs would be harmful to your retirement funds.
If your home equity has a bigger portion of your total net worth, you may withdraw some of that cash by selling off your current home and shifting to a small house. You may also opt for a steady income by taking out a reverse mortgage loan. If you have any unpaid high-interest debts, as a last resort you can take out a home equity loan to pay off that debt. But normally, it is wise if you do not use a secured loan such as a home equity loan to pay off unsecured loans.
Curious about reverse mortgages?
5. Opt for social security benefits when needed
You can start taking the benefits of Social Security at the age of 62. But if it is possible, you can delay receiving your check. By this way, you are actually increasing your annual benefit for all the coming years.
Of course, you can definitely opt for your Social Security early if you really need the money, or you are doubtful about your life expectancy. The federal retirement security program will be useful in your retirement if you can take your chances.
6. Periodically adjust your investment portfolio
“Only buy something that you’d be perfectly happy to hold if the market shut down for 10 years.”
Warren Buffett
To get a steady income after retirement, there are a number of investment options that you may choose. Here are some of them which can provide potential long-term returns:
Equities
Mutual funds
Variable annuities
529 plans
Exchange traded funds (ETFs), etc
Once you start investing in these options, you might need to adjust the ratio of investments in your portfolio per year. It is because each year when asset values fluctuate, it also disbalances your investment targets. So, you should rebalance your investment portfolio through buying and selling portfolio assets.
You should choose one date to rebalance your portfolio, try to do it every year on the same date. You should allocate your investments through different assets in such a way that it may reduce your risks as well as give you long-term returns.
7. Consider insurance for your retirement life
Here are some of the insurance coverage that might be useful when you prepare for your retirement:
Life insurance
Long-term care insurance
Annuities
Medicare supplement insurance
All of these products are designed to serve your retirement. If you have proper insurance coverage in your pocket, your retirement funds will be unharmed if any disaster happens.
Conclusion
As per msn.com - “President Donald Trump recently issued an executive order aimed at strengthening retirement security in America.” But being a retiree it is also your duty to make things happen from your side. Plan wisely, analyze all the options, calculate your affordability, and then invest in your retirement fund.
“Live like no one else so later you can live and give like no one else.” —Dave Ramsey
Aiden White is a financial writer who lives in Foster City, California. She started her financial journey in 2015 and has been associated with consolidatecreditcard.org for the last 10 months. Through her writing, she has inspired people to overcome their credit card debt problems and solved their personal finance based queries. Being a debt fighter in her personal life, her goal is to share innovative thoughts and knowledge in the debt communities. Get in touch with her at aidenwhitejoe [at] Gmail [dot] com.
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