5 Necessities You Should Plan For Nearing Retirement
Retirement is something most people do not think about. We simply go about our lives and day after day, month after month and year after year, time flies without a hint of notice. It is like we are on autopilot and cruising through life. By the time retirement is near, reality sets in and panic grips you. You wonder if you have enough saved, how will you afford your bills and lifestyle. Will health insurance be an issue and if something serious happens, will I be, ok?
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It is easy to think that there will be enough time to plan for everything. In my 20s I thought I had unlimited amount of time and because of that, I did not plan for anything. I am 34 years old now and will be 35 in December. I have nothing saved, barely anything invested, and my retirement is a real concern for me. If I am lucky, I will have 28 hours left on retirement, if I am unlucky, I will have to work till I am 70 and that is a scary thought. This is why I am starting to heavily invest in my Roth IRA using dividend stocks and my 401(k). I want to make sure I can live comfortably when the time comes.
I am going to cover five areas you should be secure in before retirement comes around. We will discuss financial stability, health care planning, housing considerations, social and recreational activities, estate planning. These are, I think, the most important areas that should be addressed before it is too late.
Financial Stability
Out of every category here, I think this one is the most important. Without proper finances to support you in retirement, everything will become a burden for you. I highly recommend, and if you can great, if not adjust as you need too, contribute 15% to 20% of your check to your 401(K). From here, max out your Roth IRA each year which is $7,000 or $583 a month. If you have 25+ years left of working, these numbers will work for you. If you have less time, I suggest a more aggressive approach. Live frugal, cut expenses and contribute as much as you can to your 401k.
Diversifying is another good way to help strengthen your financial situation. A Roth IRA and 401(k) is great, but another source of income such as a rental property, can help offset your expenses and increase your income. Having a paid-off house is another must. Worst case scenario, you can sell your home to give you another $200k-$500k to live off. I plan to have a rental property that is paid off by the time I retire. I want to have a home and a rental alongside my 401(K) and dividend income. This will set me up for success.
Health Care Planning
If you haven’t been living under a rock, you know costs related to your health have grown. Health insurance companies are covering less and less as the years go by. Having proper healthcare set up and the income to cover this expense is crucial. God forbid something happens to you or your family, you can resolve the situation.
I have an example I would like to share with you for this one. I had a dog attack me a couple years ago. I used my arm to protect myself and he did extensive damage. I almost lost my arm but luckily, they were able to perform surgery on it and I can safely say my arm and hand function as they should. I had insurance but it only covered so much. I spent 5 days in the hospital plus 2 prior visits and it was roughly $50k-$60k total. My portion to pay was $10k, which wouldn’t have been so bad, but I had another $2k from a foot injury a few months before this event.
Imagine if I did not have health insurance? How would you afford this expense? $60k out of pocket can be crippling. Take the time to figure out what health insurance plans are available and how you can set yourself up for success.
Housing
Knowing where you are going to lay your head at come retirement should be important to you. Having a paid off house can give you a leg up and save you $1,500 to $2,500 a month in mortgage payments. Having the option to only have to worry about house insurance and taxes is amazing. It reduces your stress and financial burden.
Another benefit to a paid off house is if you underestimate and your funds dry up quicker than expected, you could always sell your home and use the funds to supplement what you did not account for. Finding a small apartment for you and your wife for an affordable price is doable. Using housing prices right now, selling your home could net you $200k-$500k in extra funding.
Social and Recreational Activities
People talk about retirement and how they look forward to it, but did you plan for the activities you would be doing? How much they would cost? According to Yahoo Finance, the average monthly expense for a married couple is $4,345. This number only reflects current data, this is something you should also consider. In the future, 20, 30, or even 40 years from now, expenses will go up as inflation rises. You need to plan.
Some costs to consider when trying to figure out your social aspect of retirement are birthdays, anniversaries, movies, events and the biggest one, vacations. You are retired and you will want to enjoy yourself, plan for this.
Estate Planning
Something people tend to not think about or refuse to think about, is death. What will happen to everything you own when the time comes? Did you know that even with a will, your loved ones could still lose out on some of your money due to costs and taxes due to probate?
What I probate you might ask?
Investopedia defines it as Probate is the process completed when a decedent leaves assets to distribute, such as bank accounts, real estate, and financial investments. Probate is the general administration of a deceased person’s will or the estate of a deceased person without a will.
I encourage you to consult an estate lawyer and find ways to protect yourself and your loved ones from this. Create a trust can help bypass this and help your loved ones get more of what you leave behind. In addition, take the time to create a will so a lawyer knows how to distribute your assets. I am not a lawyer, so please consult one regarding this topic.
Another reason to plan is if you own any stocks. I created an article on this topic which you can find HERE. Again, I am not a lawyer, financial advisor or anything like that. This is simply my opinion.
DISCLAIMER
I am not a financial advisor or licensed stock broker. This is my opinion. It’s essential to consider that no investment is without risks. As with any investment decision, thorough research and consideration of your financial goals and risk tolerance are crucial. Consult a financial advisor if you are unsure how to proceed further.
