By Amanda Weiss
Thinking about retirement can be concerning, especially from a financial standpoint. Many retired people don’t have a large steady income, if any at all. Therefore, it can be daunting to find ways to save enough beforehand to have a comfortable retirement. Luckily, with enough strategy and early planning, you can enter retirement without too much worry. In fact, you may even find that retiring early is a viable option for you. Either way, if you take steps to secure your savings now, you will thank yourself later. For some ideas to implement in your life, here are 9 moves to boost retirement or even retire early!
1) Pay Off Your Mortgage Before Retiring
One common source of significant debt is your mortgage. Since housing can be extremely expensive, most people take many years to fully pay off the purchase costs. But doing so before you retire will help you in your retirement. Since you may only make a steady income while you work, paying off a mortgage while retired can eat into your savings. If you are subsisting mainly on those savings, this could be a concern for you. You can try to alleviate this worry by reducing the length of your mortgage by several years. Your monthly payments may go up slightly, but you can probably make some budget adjustments to make this feasible. If you have not yet bought a house, you will want to factor in mortgage length, and look at pricing accordingly. Overall, to reduce future stress, try to pay off your mortgage earlier.
2) Put Your Savings in a Roth IRA
There are several different types of accounts you may use to save up for retirement. And while planning, you may have gotten a regular IRA because of the contribution tax deduction. But even though this immediate benefit may appeal to you, you have better long-term options. If you use a Roth IRA instead, the interest you receive on your contributions will be tax-exempt. Additionally, regular IRAs mandate that you take out some of the money each year once you hit a certain age. Roth IRAs do not, so your money can continue to accumulate interest even through your retirement years. Luckily, if you have a regular IRA, you don’t have to cancel it and start a new account from scratch. Instead, you can transfer your money to a Roth, pay the taxes on it once, and watch your savings grow.
3) Consider Getting Long-Term Care Insurance Earlier
Health care is something you will need as you age because most health problems develop later in life. Although you may not want to think about it, some conditions can lead to a need for assisted living. In cases like this, it will be financially beneficial to have long-term care insurance, as many regular health care policies will not cover the expenses of nursing homes or aids for chronic conditions. However, it is unwise to wait until you develop problems to start looking for long-term care insurance. This is because it’s extremely difficult to get if you already have a health condition. Even if you can get a policy, it will cost you quite a bit. Buying while you are younger and healthier will save you some money. For instance, according to The Motley Fool, over half of applicants in their 50’s will receive health discounts.
4) Start Budgeting Now
One of the best ways to start saving for your retirement is by budgeting your income. Planning how much you can spend on various needs and wants will help you to not overspend. You will get to know your consumer habits better. This means you will know where you can cut out some costs and still be comfortable. When making a budget, allocate some money for saving from each paycheck. It will accumulate over time. By the time you retire, you will have a nice amount set aside. But in addition to saving more now, you will build valuable skills. Getting into the habit of budgeting earlier means you will be better at it when you have less regular income. Therefore, you won’t have to make a ton of changes to your lifestyle, which will make retirement more enjoyable.
5) Take Advantage of 401(k) Employer Matching
If you are trying to save as much as possible for retirement, you should set up a 401(k) plan. With a regular 401(k), you can contribute some money into the account before taxes. This means you will ultimately keep more than if you took home your paycheck in full. Some employers offer Roth 401(k) plans instead, which take the money post-tax. But depending on your circumstances and your employer, this may still be a good option. There are some employers who have contribution matching policies. That is, your company may match a certain percent of your 401(k) contributions. This means more money for you. You should try to take full advantage of it. If you contribute the maximum of what your employer will match, your savings will grow quite a bit.
6) Try to Find Alternate Sources of Income for Retirement
Many people think of retirement as a time in which they won’t work at all anymore. For some people, this is the case. However, if you are worried about money, there are many ways you can bring in additional income. Some of these are more traditional jobs, such as finding a part-time position somewhere. If you don’t want to do this, there are some more passive ways to continue to earn. You can do things such as investing in rental properties, and you can hire someone to help you if necessary. For instance, if you want to be somewhat hands-off, a property manager can take care of the business responsibilities. Another option is to have an online sales business. You can start one on your own, or become a seller on a site such as Ebay or Etsy, depending on what you prefer.
7) Think Realistically About Retired Living
If you want to prepare well for retirement, you must think about how retirement will be. You may have a dream plan in mind, but affording a perfect retirement can be out of budget for many. You should evaluate your current income, and figure out what you can reliably save. It does no good to plan for an extravagant retirement if having one will make you run out of money. If you look at all your options, you can find a compromise between the ideal and the financially feasible. If you have things you definitely want to do in retirement, start setting aside some funds for that now. Having a clear plan about what you can afford will give you a realistic look at what your options for enjoying retirement will be.