Financial Readiness Tips for Those Nearing Retirement

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Are you nearing retirement, but fearful that you’re not financially ready? Though time may be of the essence, there are still ways you can prepare yourself to enjoy the next 30 years of your life. If your savings and income sources are going to last you that long, you’ll need to plan, budget, increase your income, and even find ways to cut back.

Read on to find beneficial advice on getting ready:

1.  Expenses/Budget

You should first start by understanding what your expenses will be once you’ve retired. This will determine what type of budget you need to live on in the upcoming years. Though your expenses, or the amount you’ll need to retire comfortably, will depend upon your existing bills and lifestyle, here are some considerations to help you plan:

–  Determine how much you’ll need – It is recommended that you have approximately 70-80% of your current income annual to live on in retirement.

–  Review current expenses – Assess your current expenses to get a general idea of what you’ll be spending monthly during retirement. To get a clearer understanding of your financial needs, try and decrease or eliminate any expenses that will not be relevant once you retire.

– Get help – If you’ve never created a budget, before you may need assistance in doing so. There are several ways to get help including utilizing online budgeting tools or working with a financial advisor.

2.  Identify Income Sources

After getting a clear understanding of how much you’ll need to live comfortably during retirement, it is imperative to solidify your sources of income. Below are some common sources to consider:

– Learn About Social Security – When you withdrawal Social Security funds will have an impact on your payout. Though the legal age to withdrawal from your Social Security would be 62, you should evaluate whether it is beneficial to pull the funds then or wait longer.

– Other sources – There are other common sources of income to consider, including a pension or 401K account through your employer as well as your own savings towards retirement.

Now tally up your income to determine if you can afford the expenses on your budget. If your income far exceeds your expenses, then you’re on the right path. If your income isn’t enough (or just enough) to cover expenses you’ll need to find sources to generate new income.

3.  Increase Income

Don’t have enough to cover your retirement expenses? Here are some tips to generate more income:

– Reverse Mortgage – What is a reverse mortgage? In a nutshell, it is a home loan available for homeowners aged 62 and older. This loan allows them to turn the equity in their home into cash. If eligible, you would not be required to pay back the loan unless the home is sold or vacated.

– Side Business – Another option is starting a side business to generate income. Try choosing something you enjoy so that it doesn’t feel like work. Ideas might include making crafts, being a blog writer, becoming an online professor and so on.

– Increase Contributions – If you’re fortunate enough to work with an employer who offers to match your retirement contributions then consider increasing your amount until you actually retire.

4.  Decrease Expenses

Another solution to ensure that you’ll be prepared for retirement is to decrease your current expenses. Lowering the expenses you have means more money in your pocket. Here are some unnecessary expenses you may be able to get rid of (or reduce) now:

– Improve your health – Health costs can be through the roof for retirees. In order to minimize this expense, start taking steps to improve your health. The less you need to pay a visit to the doctor, purchase prescriptions or visit the hospital, the more money in your pocket.

– Get rid of multiple vehicles – if you have more than one vehicle, maybe its time to sell one. Since you won’t have to commute back and forth to work anymore you can cut car repair and gas expenses in half.

– Ditch Cable – There is so much technology now that you can literally watch your favorite shows, movies, and news channels from an Internet capable device. Consider switching to an alternative such as streaming services or investing in a HD converter to receive local channels.

– Eliminate Debt – If you have a lot of outstanding debt and are nearing retirement, you may want to try increasing your payments, negotiating with the creditor, or looking into debt relief programs so that you can get this expense out of the way.

Though this is not the complete guide to being financially prepared for retirement, it does give you a good idea of how to get started. By planning as far in advance as you can and following the four steps outlined above, you should have no problem in surviving on your retirement account until you’re 106 years old! If you need assistance with financial planning, be sure to talk with a financial advisor or accountant with experience in retirement planning.