How to create a fool proof retirement plan
I don't know about you, but I can clearly see retirement today isn't that of our parents and grandparents. Scientists are confirming that people are living longer and healthier lives through diet and keeping their minds and bodies active. Let's not forget medical advancements, as well.
Today, 60 is the new 40 and 80 is the new 60. When it comes to employment, however, people in their 40's are considered too old to work in some fields. We all know the adage of age bias where employers hire younger people because they can pay them a lower salary. That coupled with the accelerating growth of technology, the mature workforce seemingly is an endangered species. This shouts even louder, the need to financially prepare for retirement.
On average, social security accounts for 40% of your pre-retirement income and that is exactly how it was designed. In other words, if you earned $100K before retiring, you should receive about $40K a year from social security. That is $3,333 a month vs. $8,333 a month. It is your job to make up the difference.
There are a number of things that can help you properly prepare for retirement, all of which you should be doing now, no matter your age. They include
Maintaining healthy spending habits
Minimizing living expenses
Being purposeful with your lifestyle choices
Saving
Investing
Minimizing debt
Having multiple sources of income
You see, when most people think about retirement, they are referring to their 401K, 403B, IRA(s), etc. These are just vehicles that are surrounded by a number of tax codes. Your retirement is all things personal finance. For instance, your comfort level while in retirement is based on 2 things; how much money you have coming in (Income) and how much money you have going out (Expenses). Developing and maintaining healthy financial habits now will ensure your money lasts throughout your entire life. But, if you are a heavy spender, don't compare prices when you shop, or buy whatever you want, whenever you want, those habits will make retirement very uncomfortable; especially if you do not have cash reserves (savings) and other investments, and you do not have assets that are producing additional income such as rental property or dividend-producing stocks.
There are many other factors that impact retirement, such as, increased prices and cost of living which we are experiencing now; health and medical needs, which are super expensive; how long you live; whether or not you receive an inheritance; and insurance coverage. These are more out of your control, with the exception of your health to a degree, and of course, if you live recklessly, your risk of death may be higher. The parts you can control are saving, investing, earning, and spending, but let's face it; it is hard to change habits and lifestyle patterns. Let's also face that it’s worth it. The sooner you start, the easier it gets, and by the time retirement rolls around, you'll be comfortably affording the life you want.
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