With the current economic conditions in the world, the last thing you will want to happen is for you to retire into a troubled lifestyle, full of financial problems. You do not want to be like most American citizens whose retirement savings received a severe hit some years back during the market meltdown. You do not want to be among those affected by a drop in the eye-popping stock market, downgrade to the American credit rating, or depressed home values or unemployment that makes your retirement dream appear impossible.
Therefore, it is advisable that you certain vital steps that will not only make your retirement dream possible, but also bright. Here are 5 steps to a better retirement.
Carry out a reality check
You are probably asking yourself whether you will have sufficient money to retire. A study conducted on most people who take part in an employer-based retirement scheme (which is a good thing) found that they never take time to calculate the amount of money that they should save for retirement. It would be unrealistic and impossible for you to determine if you are on the right track without a saving goal in mind.
Determine your target amount and if you are saving enough to achieve it by the time that you will be retiring. If your answer is no or you discover that there is a significant deficit between your current account balance and the amount you ought to save, and there are chances that you will be continuing to save by the time you hit your target retirement date, then you will be forced to make certain tough choices such as working longer, cutting back on your planned retirement lifestyle, saving more, or even chasing higher returns, thing that I am sure certain you will not want to.
Blaming the value of your retirement account on investment returns is wrong. What determines your retirement account balance is your rate of contribution over time. Despite the investment return playing a part, it does not have that much impact in the long-run.
Ideally, you should aim at contributing 15% of your gross salary to your retirement savings. This is inclusive of your employer matching contribution. Some countries have compulsory superannuation, where your employer pays a percentage of your salary into a superannuation fund, much like this one. Let us hope that your country is also one of them. The target is to substitute half of your salary with that you will get during retirement, which you are not even sure it will last for how long.
Ensure that you make the best of your company retirement program. However, if your company does not offer you that, it will be prudent of you to increase the amount of money you contribute to your retirement account.
Create a retirement income
According to a number of studies, the biggest challenge in retirement if working out how to change your pile of lifetime saving into a stream of monthly income that you cannot outlive. Some governments are even recommending its citizens, particularly the middle class earners without the traditional pension to consider buying an income annuity with half their savings as a means to prevent the possibility of outliving their savings. This has, however, raised different reactions from various financial analysts. Nevertheless, the main dilemma still remains, how to create the retirement income.
Delay social security
One of the major and vital financial decisions that retirees need to make is deciding when they should start claiming their social benefits. Most people claim it before even hitting the normal retirement age, thus losing an opportunity to gain more that 25% in monthly-adjusted benefits for their remaining life. This is a very big mistake, especially for a married couple who could boost their retirement income by more than $100,000 upon selecting the right method and time to claim benefits.
Studies show that it is very cost-effective to delay going for your social security benefits until you reach the normal retirement age. On the other hand, you may consider employing certain brilliant claiming strategies in order to capitalize on your benefits.
If you have not realized yet, your largest expense upon retirement may be on your health care. If you are lucky enough, your government might be covering a good portion of the expense via a Medicare program. If this is the case, know the Medicare program will be offered to you so as to make informed decisions.
However, if that is not the case or if the program does not cater for everything, consider applying for a supplemental health insurance program. Explore your options and choose carefully to cover yourself and spouse from devastating illness that might consume your entire finance or savings.
written by: cmzolo