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5 Retirement Planning Steps You Should Know About

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5 Retirement Planning Steps You Should Know About

Are you nearing retirement? If so, it’s time to begin taking steps to ensure you can live your golden years how you envisioned. Retirement is a time for you to dedicate more time to your hobbies, travel, and relax after decades of building your career and raising a family. The last thing you want is insufficient funds holding you back from enjoying your retirement.

Below, we’ll cover five retirement planning steps you should know about so that you can live your post-career years to the fullest.

1. Diversify Your Portfolio

Diversifying your portfolio is essential when it comes to growing your nest egg. Having your assets in numerous retirement vehicles, such as retirement accounts and real estate investments, can help ensure you still have sufficient funds even in times of market corrections and financial uncertainty. And once you retire, it doesn’t mean you should cash out your retirement accounts. You still have plenty of years ahead of you where you can still grow your money and even have some leftover to pass down to beneficiaries. Below are some investment vehicles you can store your money and watch it grow:

  • Employer-sponsored 401(k): If you’re still working and your employer offers a 401(k) and a match, take advantage. This is a great way to make your money grow and even earn free money through your employer’s match.
  • High-yield savings account: If your savings are stored in a traditional savings account that has an interest rate of only 0.01 percent, switch it over to a high-yield savings account. They’re practically the same thing, except high-yield savings accounts have interest rates much higher, which will earn you money.
  • Stocks: Once you’re near retirement, placing your money in risky stocks might not be a great idea. However, there are plenty of stocks, mutual funds, and ETFs that are less risky stocks that aren’t as aggressive.

2. Consider Reverse Mortgages

If you have considerable equity in your home and you need money quickly, you may want to consider taking out a reverse mortgage. Reverse mortgages are the opposite of a traditional mortgage. With a traditional mortgage, you pay your mortgage lender monthly bills until your mortgage is paid off. A reverse mortgage, on the other hand, is where a bank or financial institution pays you monthly, depending on how much of your home you own. You can use a reverse mortgage calculator to determine how you are able to get from your loan depending on your age, home value, and how much you owe on your existing mortgage.

3. Create an Emergency Fund

You never know when life is going to get in the way. From unexpected medical bills to expensive car repairs and other emergencies, not being financially prepared can throw a wrench in your retirement plans. To ensure an unsuspected bill doesn’t ruin your retirement, it’s important to create an emergency fund. An emergency fund should have at least six months’ worth of funds to get you through any hardships.

4. Decide If You Want to Work

Just because you’re retired doesn’t mean you don’t have to work. In fact, some retirees prefer working part-time to pass the time, interact with people, and make some extra money on the side. There are plenty of jobs you can find as a retiree, such as an online tutor, barista at a local coffee shop, or a gardener at a nursery. When it comes to working in retirement, it’s important to find a job that’s low stress, flexible, and makes you happy. You already spent decades growing in your career, which is why retirement is a time for you to enjoy life without stressors getting in the way.

5. Create a retirement budget

Budgeting is essential if you want to make it through retirement comfortably. To create a budget, you need to weigh your income and your expenses. To calculate your expenses, gather receipts from the past six months and tally them up. Break your expenses into categories, such as food, groceries, utilities, car payments, insurance, bills, leisure, etc. Then, calculate your income, including any wages, Social Security, pension, and retirement account withdrawals. 

Once you have these two calculated, compare them to see if you’re overspending. If so, it may be time to cut any unnecessary expenses, such as costly subscriptions or memberships.

Wrapping up

Retirement is a time for you to experience life in a new way. You’re no longer tied down to a job or raising kids, which means you have all the time in the world to travel and partake in your hobbies. However, in order to live your golden years comfortably, you need to be prepared. With these five retirement planning tips, you’ll be living your retirement years to the fullest.