Comedian Toba Beta once said, “You get old faster when you think about retirement.” Ignore this. The more you think about your retirement, the more alive you’ll get to be once you do retire. And if, like some of us, that time is increasingly nigh—you should consider how to live as well off as you can and maintain your lifestyle on a limited or significantly reduced income. Whether you’re in your twenties or about to retire, consider these seven strategies:
1. Plan a retirement budget.
This one is obvious, but all too often overlooked. At any point in your life, you should plan your life as a retired person. If you’re closer to retirement, you can gauge your retirement expenses using Ballpark E$timate, a free online calculator by Next Avenue. If you are years from retirement, it may be difficult to get an accurate estimate with the calculator, but it’s still useful to glance at it to get an idea of factors to take into account when planning your budget.
2. Start planning now for possible future long-term care.
Despite the fact that one of the largest expenses in retirement is health care, many omit this altogether when planning for their future. Fidelity estimates the average 65-year old couple needs roughly $220,000 for health care costs after retirement. This doesn’t even include long-term care, which 7 out of 10 Americans require. And most insurance policies don’t cover long-term care expenses. Don’t count on Medicare. If you can stomach the monthly premiums in your 50s and 60s, investing in a long-term care insurance policy can help hedge your risk down the line.
3. Find an affordable city to retire.
If you live in New York City, San Francisco or anywhere your rent can equal more than 50% of your annual income, consider retiring to a city with low housing costs. This will not only save you money each year, but you’ll also have the opportunity to try new experiences.
4. Consider moving to a state that doesn’t tax income or dividends.
To save, consider moving to Florida, Nevada, South Dakota, Texas, Washington, Wyoming or Alaska. These are all states that don’t tax your income, interest or dividends.
5. Consider working part-time when you retire.
A semi-retirement job can not only add extra income to your nest egg, it can keep you mentally strong and agile. Staving off cognitive decline can also reduce healthcare costs long term.
6. Avoid living on credit as much as possible.
Paying off credit cards at 16% interest is a punishing expense best avoided. Use your credit card wisely to create a credit history, but only buy what you can afford now. In the long run, you can’t afford unnecessary debt.
7. Live within your means.
Finally, perhaps one of the best pieces of advice you will ever hear is to rephrase “frugality.” Living frugally doesn’t mean limiting your quality of life. It means focusing on what’s important to you, to ensure you have the finances to pay for them. Budget your life so that you’re living happily but not extravagantly, especially as you near retirement. This will allow you to build you savings for the future to cover potential impending costs.
Managing your finances and getting rid of debt now can help you enjoy a happy, stress free retirement in the future. If you are feeling overwhelmed with debt, contact bankruptcy attorney Anthony DeLuca at (702) 252-4673 for a free consultation.
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