7 Unique ways to Financially Prepare for Your Retirement
by Andy Masaki on Mar 8, 2021
7 Unique ways to Financially Prepare for Your Retirement
Everyone wants to relax after hitting their golden years. For this reason, financial experts suggest that you should save for retirement starting the day you receive your first paycheck.
But the fact is, many of us don’t realize the importance of having a decent nest egg saved up to enter into a comfortable retirement. According to a Forbes report, a quarter of the people in our country do not have any retirement savings.
If you are one of them, there is no need to worry. It’s better late than never. Here we have listed some of the simple yet unique ways to financially prepare yourself for retirement.
1. Trim Your Expenses
Hopefully, you are following a realistic budget to save money and keep a tab on your expenses. But are you reviewing your budget often? If not, you should take time to review your budget at you earliest convenience.
Figure out the categories of your expenses that are not ‘necessary’, such as TV subscriptions, designer clothes, frequent dining out, etc. Try to reduce these discretionary expenses as much as possible to save more. You can dedicate these funds to save for your retirement and financial well-being.
2. Use Cash Instead of Plastic Money
A Forbes report has revealed that people tend to spend more with credit cards. Using plastic money, especially credit cards, can lure you to spend more since you can’t feel how much money is leaving your account. Eventually, your chances of overspending become much higher.
You may get a shock after noticing a whopping outstanding balance amount at the end of your billing cycle. Therefore, you may fall prey to credit card debt.
That is why it is better to use cash when paying your bills. It can help you to stick to your budget by preventing overspending and ultimately save you money. You can use these saved dollars to stash in your retirement account to prepare for your golden years.
3. Eliminate Unsecured Debts
Are you carrying around unsecured debts like credit cards? If yes, you might be sacrificing a substantial part of your paycheck making monthly debt payments. The reason being, the incessantly high interest rates of unsecured debts.
At the end of the day, this may leave you with little to no funds to save for your retirement. You are likely going to have a fixed income after retirement. And carrying debts in your golden years can take up a large share of your retirement savings.
You can find how to lower your debt burden by opting for a debt relief program. To do so, you need to approach a genuine debt relief company. The debt consultants of the company will analyze your debts along with your financial situation. Based on their findings, they will suggest the right debt relief program for you.
If you can eliminate unsecured debts, this will allow you to save more for your golden years and lead a debt-free life going forward.
4. Make Your Passion an Income Stream
According to a Bankrate study, nearly 37% of the people in our country have side hustles. These people have realized the importance of having multiple income streams to boost their savings and accomplish financial goals.
You can start a side hustle to boost your retirement savings. If you have a passion, you can turn it into a stream of income. By doing so, you can earn a few more dollars and at the same time, feel motivated and enriched.
5. Delay Your Social Security Payments
To receive Social Security benefits in full, you need to attain the Full Retirement Age (FRA). You can claim your Social Security after attaining the age of 62 but your benefits will be reduced.
The FRA depends on your birth year. For example, the full retirement age for persons born in 1960 or after is 67 years.
If you delay claiming your Social Security benefits after attaining the FRA, you can accumulate credits. They will boost your Social Security payments by about 8% every year until you reach 70.
However, the harsh reality is, according to a Motley Fool report, only about 4% of the Social Security recipients are taking advantage of delayed retirement credits.
To boost your retirement benefits, it’s advisable to delay claiming your Social Security.
6. Opt for a Health Savings Account (HSA)
Do you have a high-deductible health insurance policy? If yes, then you likely have a Health Savings Account (HSA). You can rollover your HSA balance from year to year instead of using it, especially during your working years. This allows you to accumulate funds in your HSA to help cover health care expenses in retirement without sacrificing your nest egg.
Healthcare expenses are skyrocketing every day. For example, according to a 2019 CNBC report, a 65-year-old couple in good health will need about $387,644 to pay for health-care costs for the remainder of their lives.
Once you accumulate a decent amount in your HSA, you may invest the remaining money in stocks, bonds, and mutual funds. Talk to your provider to see if there is a minimum HSA balance to be eligible for investing. For example, Optum Bank allows you to invest your HSA balance once it reaches a minimum balance of $2,000.
An HSA offers triple-tax savings as your contributions and investments are made with pre-tax dollars. Also, your money grows tax-free and withdrawals for qualified medical expenses before 65 or any other reasons after 65 are tax-free too.
Hence, start saving and investing your HSA to make the most of its tax benefits and prepare for your retirement.
7. Make Catch-up Contributions
If you have started saving for retirement late, you can compensate by making catch-up contributions. In 2021, if you are 50 and above, you can make a catch-up contribution of $6,500 to your 401k apart from your annual contribution of $19,500.
In the case of an Individual Retirement Account (IRA), if you are 50 and above, you can make a catch-up contribution of $1,000 along with your annual contribution of $6,500 in 2021.
That is why it is important not to forget to take advantage of catch-up contributions when saving for your retirement.
The bottom line is, you should start saving for retirement as soon as possible. The sooner you start saving for your golden years, the more you can accumulate. Don’t procrastinate by thinking that retirement seems too far and you can save for it later.
Hopefully, the 7 unique ways discussed above will help you to financially prepare for your golden years and have an enjoyable retirement.