It is said that retirement is a lifelong journey and not a destination. For many aspiring retirees, it may be a road to nowhere.
Over 22% of Americans have less than $5,000 saved for retirement. Many have nothing saved.
Here are five moves you must make before retiring — the sooner the better.
Develop a retirement plan
Retirement is shorthand for “retirement fund.” Retirement is not something that you accidentally fall into or happen upon. You should develop a retirement plan and implementation strategy as early as possible.
In a perfect world, you should plan for retirement with your first paycheck in your youth. Realistically, you should start planning for your retirement at least a decade or two in advance.
For example, where would you live? Will you retire fully or part-time?
Are you considering working part-time, volunteering or as a consultant? What will you do with your time? You can answer all of these questions with your retirement number.
Find your retirement number
An old retirement advice idea that you need $1 million to retire comfortably. But that’s an old-school financial generalization. Even if you believe that, today you realistically need $3 million to retire when considering inflation.
Nevertheless, a retirement goal is a customized calculation. The amount of money that you need in your retirement fund is your number, not a generalized figure that works for everyone.
Your retirement number is the amount of money you need in a retirement fund to last the entirety of your retirement. And your retirement number must be calculated carefully. Otherwise, you risk running out of money in the middle of retirement.
Do this. Find out your Social Security annual payout. No subtract that from $40,000. That’s number is closer to what you actually need annually from your investments in order to retire.
Downsizing to cut costs
You may need to consider downsizing relative to your retirement number and living expenses. If you are stretched for cash or struggling to meet your retirement number, consider selling your house and other valuable assets.
Move into a smaller house or apartment and perfect the art of living below your means.
Save as much money as possible
You should save money with every paycheck you earn. And if you end up working part-time after retirement you should save as much money as possible, too.
Unless you are financially independent, never take it for granted that your retirement number goal will always be met. Save as much money as possible all the time.
Stop paying your children’s debts
More than 30% of student loan debtors are between 50 and 64 and they owed more than $290 billion.
Elderly student loan debtors in default can end up getting 15% of their Social Security benefits garnished by the government. Often, that means retirement hope can get squashed by student loan debt.
Many elderly debtors end up in debt, however, because they choose to pay the tuition and debts of their children and grandchildren. Once your children become adults, you must set rules differentiating between your own debt and theirs.
Otherwise, you could end up in debt and poverty in your twilight years.