There’s more than one way of being ready to retire. The most common one comes in a form of having had enough of dealing with work, bosses, and co-workers. However common, that one isn’t really a long-term plan. Being prepared for retirement is about coming to a new point in your life and career. At this point, you should want to spend more time with family and friends and leave work behind.
It’s a big decision and it should be followed by careful and long-term financial planning because you don’t want to make the jump until you know you have your safety net prepared.
Make a budget
The first part of serious retirement planning is making a budget for your ordinary monthly expenses. Plan everything that you plan to spend, but don’t do it with your current salary, rather use the figure you plan to work with after the retirement. Try living on this budget for six months before retiring and see how well you can manage. This trial run should give you an idea of how things are going to be. Also, have in mind that medical expenses might increase as you get older.
You should be saving a lot before you’re ready to retire, but it’s never late to get serious about it. A couple of years before retiring should be used to ramp up your savings. Ask about catch-up payments to your 401(k) and start working on a personal savings account. Firstly, trim all the unnecessary expenses and see how much you can save right away. Living below your means for a while is worth it if the goal is to have a peaceful retirement.
Having a good credit score could really mean a lot during retirement because it allows you to get a loan without too much hustle if there’s a need for it. The best way to ensure a good score is to pay all your bills on time and have some savings. This is a sign that you will repay the loan in a timely fashion. Also, never go over your credit card limit because that’s irresponsible and looks bad. However, financial institutions like NSW Mortgage Corp can offer loans even if you have a bad credit history, thus helping you achieve your goals.
Medical expenses are going to be your biggest financial concern in the years to come. They are not always easy to estimate but consult with your doctors and financial advisors. Make sure your insurance plan covers problems that you might expect when you get older, even though you’re not experiencing them yet. Also, it might be a good idea to start working on an emergency fund a few years before. It shouldn’t be used for day to day medical expenses. It’s best to leave it alone and use it only if something major comes up.
Start changing your portfolio. At a certain point, the goal should be to maintain your current living standards, rather than expanding your existing net worth. This means that low-risk investments with safe and steady returns are the best way to go Government bonds are always a popular option and they’re a safe bet. Also, think about investing in some real estate to rent. There’s a bit more work involved there, but you can always hire someone to manage the property and deal with tenants on a daily basis.
Make sure you’re both personally and financially ready to retire. The process is going to involve some changes, but it could also be the best part of your life, now when you don’t have to worry about professional obligations.