Contrary to the saying “age is just a number,” being aware of those digits do matter quite a lot—not to indicate physical weakness or mental superiority, but to ensure financial stability after retirement.
There’s a lot to consider financially for your senior years: healthcare, life insurance, saving yourself from debt, and many others. Luckily, you can start managing it as early as now.
While keeping your cash stored away in a safe at home might seem like a good idea because you want to personally safeguard and have easy access to your life’s sustenance, it’s actually counterproductive.
In the event of a disaster such as a fire, flash flood, or earthquake, insurance would typically only cover a small amount of the value lost. Additionally, as the years pass by, the economy may experience inflation. This means you’ll only be keeping your money stagnant instead of allowing it to grow.
Where to Put Your Money for Retirement
A great way to prepare for your senior years is a retirement fund. Though this needs a long term investment, it is well worth it, as retirement fund offers more tax and growth advantages than your standard investment plan. Starting early with as little as 10% of your earnings and regularly maintaining it is bound to get you much more.
You can opt for a 401(k) plan with your employer; the advantage with that is you’ll be able to get the full amount you intend to invest—which may only really be limited by the maximum amount allowable—and let it grow until your agreement date. You’ll only be taxed at the end as you withdraw your money.
The other retirement account option is Roth IRA, which necessitates payment of your taxes first before investing. Once you withdraw, you’ll no longer need to pay taxes.
A helpful addition to retirement accounts is a life insurance plan. More than the assurance of your expense coverage after your passing, getting this type of insurance means solving your dependent’s financial insurance. You’ll be able to safeguard your loved ones even long after you’re gone.
How Your Money Circulates at Retirement
After all is said and done, you arrive at retirement day, and you can finally take out the investments you’ve made over the years. What are your options or next steps after this? There are a couple of things you can do with your money.
Keep It as an Investment
If your money is over the minimum invested amount and you’re still financially stable to not need to withdraw the funds, you can always choose to leave it be. That’s even more earnings for your investment.
Withdraw Required Minimum Distributions
While you don’t immediately need to withdraw the money from your 401(k) once you’re out of the employment game, you’ll still need to take required minimum distributions after the age of 70 ½.
Invest it Again
If you’ve chosen to start withdrawing funds from your investments but would still like to keep earning, you could always opt to reinvest. Of course, the best track to take is a low-risk investment to ensure financial security, like treasury bonds or certificates of deposit.
There’s no better time to take pleasure in what you’ve worked hard for all your life. Think of the leisurely activities as another form of investment, where you can try out a new hobby or revisit old pastimes.
The Proper Plan of Action
Before diving into any immediate investment plans for your retirement, it’s essential to set out your financial plans first. Take account of your cash flow. Aside from listing your standard living expenses, being mindful of your income will also help you plan out your finances.
Doing a thorough review of your cash flow can help you manage how you spend, too. You can then ask yourself which of your expenses are essential to keep and if there are some that you can drop.
Evaluate your priorities. Acknowledge the debts you may have and organize them by their level of priority—which needs to be paid first and how much you need to shell out to settle them. An excellent practice to incorporate into your cash flow is to allot a small percentage of your income specifically for your debts.
If you’re keen on making the most of your free time, you can also look for other means of income. This will help pay off your priorities much faster and allow you to live a little more comfortably. Many websites like Up work and Freelancer provide a plethora of freelance opportunities for different fields.
It’s easy to lose track of daily expenses in favor of enjoying the money that you earn; however, it does pay well to consider your future and retirement. It may not be a requirement, but planning will ensure financial stability when you hit your golden years. At the end of the day, how you allot your finances is entirely up to you, the important thing is for you to prepare for your future.