You know about what it costs to run your household on a monthly basis. And you know you should be padding that emergency fund. But what can you do right now to prepare for the changes that retirement will bring? Here are 6 things you can do now to prepare for your retirement.
1. Your prepare for retirement checklist should start with having a budget
Everyone needs a budget at all stages of life. But it’s particularly important as you near retirement. A budget tells you where your money goes. Basically what’s coming in, and what’s going out. It helps you determine if you’re living within your means or spending money that you should be saving for your future.
2. Automate savings and debt payments
According to the 29th Annual Retirement Confidence Survey (RCS), 70% of American workers say debt is having a negative impact on their ability to save for retirement. Furthermore, 55% of workers say they are unable to save for retirement and save for other financial goals at the same time.
3. Don’t support others at your own expense
About two in five Americans have provided financial support to a family member during the past year, according to the Family Obligations Across Generations survey. It’s natural to want to help your loved ones. But it can be a tough balancing act. Especially if doing so may jeopardize your own retirement savings. According to AARP, family caregivers who are age 50 and older who leave the workforce to care for a parent lose, on average, nearly $304,000 in wages and benefits over their lifetime. These estimates range from $283,716 for men to $324,044 for women. There’s even evidence showing that taking on the role of caregiver for aging parents in midlife may substantially increase women’s risk of living in poverty in old age.
4. Don’t rely on working in retirement
PwC’s 8th annual Employee Financial Wellness Survey revealed that 82% of workers believe they will work full-time (32%) or part-time (50%) in retirement. In line with those results, the RCS study indicates that 74% of workers expect paid work to be at least a minor source of income in retirement. However, in reality, 4 in 10 retirees surveyed retired earlier than they expected. Most often due to a health problem, disability, or changes within their organization.
5. Account for rising healthcare costs
Healthcare costs represent one of the most significant expenses you may encounter in retirement. Yet, according to the RCS study, fewer than a third of respondents had actually tried to calculate how much they may need for medical expenses. While Medicare, which kicks in at age 65, covers a portion of your expenses, the rest is up to you. 5% of households will experience out-of-pocket medical bills of more than $300,000. 1% will see their out-of-pocket medical expenses total more than $600,000 over the course of their retirement.
6. Seek professional advice
A surprising number of Americans try taking on retirement entirely by themselves. But, even experienced and highly confident investors can benefit from professional advice from an unbiased third party. No matter how competent you are at managing your own finances, it’s nearly impossible to do so in a highly objective manner, devoid of emotion. A trusted advisor can also help you approach your finances proactively rather than reactively. Emotion is the arch-enemy of sound financial decision-making. The financial advisor you choose to guide your financial future must place your best interests at the forefront of the relationship, working in a fiduciary capacity
But deciding to work with qualified advisors like the advisors at Teton Wealth Group can really help prepare you for retirement.
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