Every day, 10,000 Americans retire. The retired life is a dream for many people — so many that they opt for early retirement.
However, are you truly ready? Do you have the minimum of a million saved up? Did you invest your extra cash and sign up for retirement plans? Do you think Social Security is enough (it’s not)? If not, you could struggle in retirement.
Before you dream of moving to Florida, you should ensure you have enough saved before you live your retired life. Here’s the best way to save for retirement, so you walk into retirement with plenty of cash in hand.
Know How Much You Need for Retirement
Those 65 years and older spend close to $46,000 a year while retired. Spending this kind of money probably wasn’t an issue while you were employed. Without that extra income coming in, you’ll quickly find yourself struggling.
The reason why so many people struggle in retirement is they’re used to their previous state of living. This makes it difficult to budget and conserve funds.
Before you start your retired life, know how much you need to spend every month.
This includes the essentials — utilities, water, vehicle expenses, groceries, etc. Make sure you have enough in your accounts to accommodate these expenses for the rest of your years.
Even though you’re planning your daily and monthly expenses while retired, there’s always a chance an emergency will occur. It’s best you save more than enough for retirement.
Make saving a habit. While you’re working, save a part of each paycheck. See if you can contribute more to your 401k or IRA.
Know Your Employer’s Pension Plan
Many employers offer retirement plans, including a pension plan. Before retirement, know how this pension plan works.
On average, you’ll receive the funds from this plan in regular payments throughout your retirement. Figure out how much these payments are worth and how often you’ll receive them.
In addition, you may still have retirement benefits from previous employers. It’s worth contacting a previous employer and asking about this.
Contribute to a Retirement Plan
Do you not receive a pension or 401k plan from an employer? This doesn’t mean you can’t contribute to your own plan.
Your options include a Roth IRA, a traditional IRA, a SEP IRA, a self-directed 401k, a simple IRA, and many more. Unsure of which one to choose? Hire a financial advisor or ask your bank for help.
From here, contribute as much as you can. Take a percentage of each check toward these plans. If you received an inheritance, use your inheritance toward this plan.
And Don’t Touch That Savings!
A major mistake people make is touching their retirement savings. They usually have an excuse.
They were caught in a major financial emergency, they lost their job, they had a kid, etc. Unfortunate things happen and this is why it’s useful to have a savings account.
However, have two savings accounts. Keep a savings account as a rainy day fund whenever something goes wrong. But don’t touch your retirement accounts.
Many accounts offer a feature where you can’t withdraw from your account without penalization. Certain accounts don’t even allow withdrawal without a penalty from the IRS.
Listen to What Your Financial Advisor Says
Face it, not all of us are finance experts. You may not know how inflation affects your accounts or how much capital gains tax you owe. And that’s okay. However, listen to your financial advisor and their advice.
For example, say you lost a decent amount of money on your trust fund this quarter. But let’s say you received a bonus at work.
Instead of using that money toward a vacation or other amenity, ask your financial advisor for their advice. They may suggest you invest that extra money. If that’s the case, listen to them.
Know Your Social Security Benefits
The average retired person only receives $1,461 a month from social security. Is this enough to live on? Probably not.
This is why you should plan out your monthly income, with how much you receive from social security and how much you receive from your pension or another retirement account.
On average, you’ll receive 40% of the salary you earned when you were working. It’s still best to contact the social security office and ask.
What If You Lose Your Retirement Funds?
While you should prepare to ensure you’ll be financially healthy during retirement, you should also prepare for the worst. What if you lose your retirement funds and now you’re broke? Fortunately, you have options.
Reduce Your Space
The biggest change retired people make is they sell their home.
They usually downgrade to a condo or even an apartment. Some even sell their home and live out of an RV or move to a different country, especially those who dream of traveling.
Move Somewhere Inexpensive
While living in Florida is nice, is it cheap? Not exactly, especially if you’re living in a major city.
Instead of living in paradise, live somewhere inexpensive. It may not be on the beach but you’ll save money and sustain the same lifestyle you had while working.
Get a Side Hustle
Side hustles such as Uber are perfect for retired people. You can set your own hours and still make a decent amount of money.
Others in retirement decide to start a side business or focusing on a hobby that can provide a profit, such as writing a book or selling your art.
Take out a Loan
Worst come to worst, there are plenty of loan options for retired individuals. Companies such as Bonsai Finance offer loans that accommodate those with different credit scores and income levels.
The Best Way to Save for Retirement: Become a Millionaire!
Let’s face it — the best way to save for retirement is by becoming a millionaire. But you don’t need to be a Silicon Valley mogul or a Wolf of Wall Street to earn millions. Here are simple steps to become a multi-millionaire.