7 Steps to a Carefree Retirement

Everyone wants to enjoy their retirement, a stress free time to do whatever you want, whenever you want. But without smart planning your retirement can end up a disastrous mix of insufficient funds, stress, and even boredom. Here are the 7 things you should take care of to ensure the perfect retirement:

1. Build Sufficient Savings & Investments

In order to retire you’ll need enough income to last the rest of your life. A fixed sum alone which you draw from each month is unlikely to work for most people, so you’ll need to invest wisely. You should aim to have enough savings so conservative investing will provide you with a monthly income you can live from. You’ll also be wise to diversify your investments so if one fails you won’t be left with nothing. Use our retirement calculator to see how much money you’ll need to have saved before you retire, and read our articles on investing to learn more about diversification and smart investments.

2. Consider Inflation

You need to keep inflation in mind when considering how much money you’ll need for retirement. The long term average rate of inflation is between 3-4% per year. That means your money will lose 3-4% of it’s value every year on average. In order to simply keep up with inflation, you’ll need to make that much with your investments. To actually have your money produce real income for you, you’ll need to average over 3-4%.

3. Get Out of Debt

Debt can spoil your retirement, fast. Before you retire you should pay off all your debt. Not only will this dramatically decrease your monthly expenses, but it will also free up money for investing so you’ll have even more retirement income as the years progress. By paying off your debts you’ll need less and make more. (Low interest debt may be an exception to this, especially if you’re putting money into a 401k where your employer matches your payments.)

4. Trim Your Expenses

The lower your expenses are, the easier your retirement will be. Before retirement you may need two cars for example, requiring you to pay insurance for both, and perhaps two car notes. Do you really need two cars if neither you or your spouse are working? It’s likely you can find other areas where you can save money, leaving you more for vacations and enjoyment.

5. Get Complete Health Care Coverage

It’s likely you’ll need medical care at some point during your retirement, and even with Medicare the costs add up quick! Additionally, not everything is covered by Medicare. Make sure you either have sufficient monthly income or insurance to cover everything Medicare does not, including long term care, premiums, and deductibles.

6. Consider Retirement Timing

Although early retirement may be attractive, consider how much better you can live by postponing your retirement a few years. If you already have the savings to retire, working several more years will significantly increase your retirement income and security. However, the prospect of more retirement income should be balanced with quality of life. Money doesn’t make you happy and you never know when your time will be up, so it is important to enjoy your life while you can.

7. Develop Hobbies

Work take up the majority of pre-retirement time. When you finally quit your job you may be surprised how much free time you actually have! Many retirees find themselves board, and end up going back to work. Before you retire, think about what you’ll do when you don’t have to go to work each day. Do you already have hobbies you’d like to pursue? Is there anything you always wished you could try? It’s never too late. Volunteering is another terrific and gratifying way to spend your time. Consider spending some of your time helping others. You’ll probably find you get back more than you give.

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