I’m assuming you want to spend your retirement comfortable and happy. If that is true, you need to start planning for it well in advance. That’s hard to worry about when you’re just starting a new career or paying off student loans or wondering how you’ll get your kids through college. However, saving and planning for retirement as soon as possible is essential. Otherwise, you’ll find it’s too late. Here are five vital moves you need to make for a successful retirement.
1. Contribute to your 401K. Max out your annual contributions, if you can. It might seem like a sacrifice, since those 401K contributions will mean a few less dollars in your paycheck. However, those dollars you sacrifice now will make you more money in the long run. Find out what kind of retirement savings plan your employer has in place, and contribute as much as you can to it. Many employers will match your contributions, and you don’t want to let any of that money go to waste. If your company matches up to eight percent, for example, make sure you are contributing at least eight percent of your own salary so you don’t lose a single cent of the match. That’s just free money you’re leaving on the table. If you are self-employed or you own your own business, find out what kind of retirement plan will work best for you. It might be a Simple IRA or a SEP IRA or a Solo IRA.
2. Budget for healthcare. You will have a variety of Medicare plans to choose from if you wait to retire until you are 65. However, you won’t be able to count on Medicare for everything. You’ll need a prescription plan, and you might need additional coverage depending on any medical conditions you have. Prepare for it, and start investigating your options. Nearly all major health insurance carriers offer supplemental insurance plans for Medicare. Get yourself educated at least a year or two before you turn 65. If you are planning to retire early, you’ll need to ensure you have health insurance coverage before you become eligible for Medicare.
3. Keep your home. Many people who find themselves upside down on their mortgages have opted to walk away, calling it a “strategic default.” There may be many great short term financial benefits to abandoning a mortgage that seems like a bad investment. However, you have to remember that most mortgages will be paid off someday. Also, the housing market can only go up from where it is now. So, when it comes to planning for retirement, it makes more sense for you to keep your home and continue paying for it, even if you currently owe more than it’s worth.
4. Decide if you will work. Retirement is a great opportunity to leave the daily grind of the 40-plus hour work week and do something you really enjoy. Just because you are retired doesn’t mean you have to stop working. Maybe you’ve always wanted to work in a flower shop. Now is your chance. Perhaps you always wanted to try nonprofit work, but you worried it wouldn’t pay the bills. See which charities are hiring. You can work part time or as a contractor without messing up your social security benefits and retirement income too much. The key is to be prepared. Think about what you want to do and how many hours per week or month you want to do it. And if you don’t want to work at all, that’s fine too, but it may be something thats enjoyable and will keep you busy.
5. Shore up your insurance policies. Once you have health insurance taken care of, you’ll need to examine your life insurance, disability insurance and any other policies that need to be in place to protect you and your loved ones. If you do not already have an insurance broker, consider talking to one. A professional can help you put insurance policies to the best possible use.