Getting old can be expensive (although most prefer it to the alternative). The question for many, though, is how to fund your later years.
Manoj Arora, author of “The Rat Race to Freedom”, wrote:
“Make sure you have a plan of your life in your hand, and that includes the financial plan and your mission.”
Whether you have already retired or are still working, these 10 strategies will help you pay for your “Golden Years”.
10 Financial Strategies for Retirement
- Plan for the future, not for the present. Although more and more people are working after age 65, don’t expect your income-earning years to extend far enough to cover future costs. Don’t expect current programs will exist later. Don’t expect you’ll stay healthy. Plan for the worst and hope for the best.
- Savings aren’t enough. Savings are only part of what you need for your future. Save as much money as possible, but realize your savings are unlikely to cover unexpected costs. Investments are a necessity to ensure you have sufficient funds to cover future costs.
- Rely on yourself. Don’t expect Medicare or Social Security to cover your medical costs. They probably won’t. As for a pension, well, good luck finding a company that still offers pensions and won’t welsh on them. If you’re still working, and your company offers a 401K, invest. In addition, consider an IRA, stock market investments and other options that will produce income after you’ve retired. Make yourself as financially independent as possible.
- Insurance helps. If you can afford it, purchase long-term care insurance to cover the costs associated with Assisted Living and help for Activities of Daily Living (ADLs). AARP has a helpful guide.
- Home equity is an option if you plan to downsize or take out a reverse mortgage to pay for future costs.
- Live in or move to a state that offers programs for older Americans. AARP has a state scorecard with information on state programs for older adults and their caregivers, as well as comparing states. Also check into states with low cost of living.
- Investing in the stock market can provide you with ongoing income, whether you’re working or not. Just be sure to develop a diversified investment portfolio to prevent losing it all at once. And, yes, your 401K is an investment that is subject to loss.
- Rental properties can offer an income stream as long as you have reputable people taking care of them. Don’t presume you’ll be able to manage them in the future.
- Make cost reductions a habit. Reduce expenses. Downsize. Try the cheaper cable TV package. Buy a used car instead of a new one. Pay off your credit card balance.
- Use a checklist or consult your financial advisor at the end of each year to make financial decisions regarding Medicare, taxes, investments, required minimum distributions, and beneficiaries. Don’t take a hands-off approach.
Planning is not only critical in retiring, ongoing planning and maintenance are important to ensure a comfortable retirement.