Do you have a wish list of goals for your retirement? If you’re like most retirees, your list may include things like traveling the world, pursuing a new hobby or visiting friends and family. Of course, to check off those items, you’ll need a strong financial foundation in retirement.
It may be helpful to develop a list of financial objectives to hit before you retire. Below are a few such objectives. However, some items are nearly universal for a comfortable and financially stable retirement. Three such items are listed below. If you’re preparing for retirement, you may want to develop a plan to hit these milestones.
Build a sizable reserve fund.
It’s always advisable to have a significant emergency fund. Life can change quickly. You never know when a costly emergency, like a medical issue or a home repair, will arise. Conventional wisdom is that it’s helpful to have enough savings to fund at least a few months’ worth of living expenses.
However, emergency funds are even more important in retirement. You don’t have the benefit of a regular paycheck to supplement your savings. An emergency could force you to dip into your retirement assets, limiting your ability to cover living expenses in the future.
There’s also the increased risk of costly medical issues when you get older. It’s only natural that your health may decline as you age. Many retirees assume that Medicare covers all medical costs, but that’s usually not the case. There are many medical expenses that Medicare does not cover, including long-term care. It’s helpful to have a significant reserve fund to help pay for these costs.
Pay off your debt.
Debt is a fact of life for many Americans. Debt can even be a helpful financial tool, especially when used to fund a home purchase or possibly an education. In retirement, however, outstanding debt can be a drain on your income and assets. Every dollar used to service debt is a dollar that can’t be used to fund your lifestyle.
If you have outstanding debt, now may be the time to get serious about paying it off before you retire. Develop and implement a plan to pay it down. You may want to consider consolidating debt into vehicles with lower interest rates, or possibly even renegotiating the rate and payment terms with your creditors.
Maximize your guaranteed income.
One of the biggest challenges in retirement is making sure your income and your assets last as long as you need them. You can’t predict how long you will live, so it can be difficult to know how much money you can afford to withdraw from your savings each year. If you take out too much early in retirement, you may not have enough left to fund your later years.
You can minimize this risk by maximizing your guaranteed income. You’ll likely have guaranteed lifetime income from Social Security. You may also have a pension. Consider other vehicles that allow you to convert a portion of your savings into a guaranteed lifetime income stream. For example, annuities offer multiple strategies to generate income that you can’t outlive.
Ready to check these items and more off your pre-retirement to-do list? Let’s talk about it. Contact us today at Intelliplan Financial. We can help you analyze your needs and develop a plan. Let’s connect soon and start the conversation.
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