Retirement usually evokes blissful daydreams of free time, filled with well-deserved relaxation and everything else that came after work for many years on end. However, without the proper planning, this is exactly what these sweet mental images will remain – daydreams, as opposed to reality.
Leaving retirement plans for the last minute is an almost sure recipe for disaster. The factors to consider are too many, sweeping, and complex.
Besides finding the best equity release rates in the UK, which is always a source of great relief and security, there are a number of other things that can make your transition into retirement as smooth, seamless, and care-free as possible.
Define What Ideal Retirement Means to You
Think hard about the kind of lifestyle that would make you happy after you stop working. In fact, you might not even want to stop working altogether. Many people find a part-time gig that brings them satisfaction or at least money without too much sweat.
Maybe you want to use your free time for business ventures? Or perhaps your focus is entirely on basking in your laurels, spending time with your loved ones, and indulging in activities that couldn’t be further away from the notion of work.
There are no wrong choices, but if you don’t outline a specific scenario in advance, you might not get to choose at all.
Determine a Budget Plan
Don’t think that retirement automatically cuts your expenses in half. In fact, all the extra free time, coupled with the possible desire to fulfill unexplored dreams, can make retirement costlier than life before it.
This is why you shouldn’t, under no circumstances, retire without setting a retirement budget plan first. You need to at least account for the most predictable elements of the equation, from indispensable items on your bucket lists to medical care, and other constants and variables we’ll get into.
Gage Your Financial Income
This is part of the previous point and quite a major one at that.
Ideally, retirement doesn’t mean that money just stops coming in. Depending on your career and life choices, you might have a number of sources of retirement income, the main ones being social security, investment accounts like 401(k) and IRA, possibly a pension, as well as independent investments and business ventures you might have undertaken.
One important thing to remember about social security is that the benefits you’re entitled to are directly determined by the age which you retire. Retiring prematurely will naturally result in reduced benefits, whereas retiring after the full retirement age will earn you some delayed retirement credits and respectively more benefits until the age of 70.
Return on investments can be quite tricky and hard to predict. However, a general rule of thumb, despite some experts considering it outdated, that can give you an idea of the return you can expect, is 4% of the invested funds in the first year, and then 4% plus the annual inflation for every year after.
No or Minimal Debt
No matter who you are and just how close to the edge you like your life, you can consider this as arguably the most universal rule of them all.
High-interest credit cards and personal loans should be hard, resounding no in the world of retirement, as they can quickly and relentlessly eat away at your hard-earned savings. They are the very reason why many people stay in debt to their very end.
Mortgages are a bit more of a gray area. While it’s certainly preferable that you pay them off before retirement, not everybody is capable of accomplishing that, and there are certain scenarios, involving home equity, that present viable alternatives, such as moving and downsizing, renting, and reverse mortgage.
Review Your Health Insurance Coverage
Health insurance plans are the villains in many retirement horror stories. To avoid being part of one, you need to consider some highly individual factors and variables and weigh in the pros and cons of the different plans as they relate to you and your family in particular.
One thing worth remembering is that Medicare eligibility kicks in at the age of 65.
This is definitely the most optional advice on the list, however, it’s definitely something to take under consideration.
While the thought of going far away from your family and loved ones (if they live nearby) might seem absurd at first, you might not even see each other as often as you’d like because of their busier schedules. Moving somewhere cheaper can help you save extra money that you can then spend on vacations with them, making for much more special times and memories.
Furthermore, you should think about yourself, too. Chances are, job opportunities dictated your place of residence, but retirement is a different story. Moving somewhere you’ve always dreamed of can be the start of the next best chapter of your life.
At the end of the day, as important as planning in advance may be, you also need to make assessments, and possible adjustments, on the fly. As long as you are cautious about the way you enjoy your retirement, you should be fine.