After the Work Is Done: Some Ways to Save and Build Wealth for Retirement
Retirement is a part of life that most look forward to. It is the time where we can finally relax after many years of hard work and be free to do with our time as we please. To be free of the monotonous workweek is a coveted prize, but it comes with a catch. That catch is the financial aspect of retirement.
Unfortunately, in America, there are a great number of people who are unprepared for the financial burden of retirement. According to the Manhattan Institute, around 47% of Americans have no sort of retirement plan. This is an extremely frightening statistic when considering that the retirement cost of living is only about 80% of what your previous non-retirement annual salary was.
With this, many need to be prepared for their future when their time comes to finally retire. But, many aren’t sure where to start or what they should be doing to get to retirement in a financially good spot. Here are some ways to save and build wealth for retirement:
Build a Plan Before Retirement
It cannot be stressed enough how important a plan is when considering retirement. If you cannot get a grasp on your financial situation beforehand, it can end up being the difference between retiring sooner rather than later. This is why it is the first step anyone should take before considering retirement.
Where you get your income from, how much that income is, and where you spend that income are all questions that need to be answered beforehand. Any financial advisor worth their salt will always tell you that making a budget is essential to any financial goal or plan. Finding out where your money is going and where it is coming from are some of the most crucial things to keep track of before and during the age of retirement.
It is also essential to stick to this plan when retiring. Constantly changing your strategies and spending habits are good ways to end up in a worse place financially than you could have been if you had stuck to the original plan. Meeting with a financial advisor is a good idea to make sure this plan is solid enough to last.
Consider a Reverse Mortgage
A very common tool for those at retiring age is to take out a reverse mortgage. Reverse mortgages are basically where, once you reach the age of 62 and own your home, you can take out a loan against the equity in your home. The loan is not expected to be paid out in your lifetime. This allows for another addition to your available funds during retirement.
In this economy, there are many pros and cons to this strategy. With reverse mortgage costs becoming better and better for the average retiree, many think that it poses a great opportunity to earn more money for retirement. With this, the upfront cost of a reverse mortgage is a thing to consider before taking one out. Overall, it has its risks but it is an option for those who need the extra income during their retirement.
Invest Wisely Before Retirement
Currently, in the United States, there are over 600,000 different 401(k) plans out there along with around 60 million active investors. Knowing this, one must invest in some sort of retirement plan before making the jump to retirement. On top of the rising cost of inflation, which is making your saved funds worth less and less every year, the average worker needs to worry about having a stable amount of funds to use in retirement.
There are tons of different investment plans that are made for retirement. The 401(k) is a common one that lets employers match a certain percentage of funds invested into it. Along with this, there is the IRA (Individual Retirement Account) that allows for investors to invest in retirement for tax-free results. Roth IRAs allow for tax-free withdrawal of the money when the age of 59 and a half is reached.
As previously stated, there are tons of options out there for the average person to make some gains on their income for retirement. Finding the one that fits your needs after retirement is crucial to providing a solid income during retirement. Plus, the benefits from these plans like matching the percent put in and tax-free withdrawals are too good to pass up.
Overall, retirement is an exciting time that is a great opportunity for relaxing and passionately pursuing the things you enjoy. But, it cannot be stressed enough how crucial it is to be prepared for this part of life. With this, it is also important to meet with your financial advisor before making any final decisions. This way, a retirement plan can be tailored to your individual needs and goals.