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4 Basic Strategies for Retirement Planning Everyone Should Know

The retirement years are one of the most rewarding and also potentially delicate phases of life. People experience many joys in their later years. However, they may also have to endure diminishing physical strength, slowing of mental faculties and the onset of age-related illnesses. Given the inevitability of health conditions in old age specifically, it‘s vital to keep the controllable factors in check to avoid exacerbating medical problems. This can be done with good retirement planning.

retirement planningPerhaps the most important such controllable factor is your financial stability. Money doesn’t equal happiness or freedom from sickness or other problems. However, the more funds you accumulate, the higher your chances of having a less stressful retirement when it comes to the financial side of things.

With that in mind, here are a couple of valuable tips for retirement planning that aren’t difficult to do but whose payoff is huge.

Retirement Planning Should Focus on Goals

It’s a simple statement really – you cannot get to your destination if you do not know where you are going. A written plan with clear milestones and goals is the first step to simplifying retirement planning.

Ultimately, your financial success is the culmination of numerous small and smart decisions you make every day. Plans create the context necessary to focus on the good choices you have to make. Furthermore, planning costs you virtually nothing except time and the occasional fees to consult a good financial adviser.

Related Content: 5 Warning Signs When Choosing a Financial Adviser

For best results, your plan must not only state your savings goals but also the specific actions you must take to achieve them. It is undeniable that you must save money. However, specific retirement plans will vary from person to person depending on abilities, skills, interests, resources and responsibilities.

One thing to keep in mind in retirement planning is to look at ways to build residual income in paper assets, real estate and/or a business. These are great ways to generate passive income that exceeds your retirement living expenses.

Your Lifestyle Must Lag Income

Thanks to our culture of consumerism, the average person is under great pressure to prioritize things over the financial freedom of actual wealth. The result is that a huge section of the population is either drowning in debt or living paycheck to paycheck.

Controlling lifestyle spending is crucial if you want to accumulate assets. This does not mean living a boring life. You don’t have to be permanently indoors on weekends or go on vacation once every five years. But you can find much cheaper and equally fun alternatives for goods, services and entertainment.

Become Financially Literate

There are countless ways to make money and countless places to invest it for growth. Remember, even in the worst economic conditions, there are people whose wealth is growing. To ensure your retirement savings are always looking up, you have to know what you need to do in different market environments.

The advantage of learning about finances is that it pays dividends for the rest of your life. And there are many ways of acquiring financial knowledge. You can attending professional courses, read reputable books, conduct internet research and have conversations with financially successful individuals. Most importantly remember that financial knowledge is not developed in one day. It takes time, discipline and consistency.

Ironically, you can also learn about finances through bad experiences. However, this is a costly path. Learning from the mistakes of others is always far cheaper.

Related Content: Should I Retire Early? 9 Questions to Help You Decide

Understand Risk Management Strategies

The principles of wealth creation show that avoiding losses is just as important as realizing gains. So good retirement planning strategies help manage the risk of loss using a range of tools. These include diversification, real estate, timely asset exits and insurance.

Insurance is particularly important but isn’t as heavily discussed as investment diversification when it comes to retirement planning. You should not only insure your assets but your health too. One health emergency can potentially wipe away your lifelong savings. Medicare is a great option in the long run to cover emergencies, but it will not cover everything — long term care, for instance, is not included.

Be sure you know the answer to the question “What is medicare?” and can identify what additional health insurance you need in retirement. You may also require medication that helps your body function properly. So plan for this in both your retirement savings and present day personal care budget.

Additionally, simply affording your retirement may be a concern. One route some people take to pad their income, at least temporarily, is to apply for a reverse mortgage. But it will be important for you to learn all of the reverse mortgage pros and cons. You need to have a proper understanding of all the risks involved with reverse mortgages before you proceed down that path.

Retirement planning has a reputation as being a tedious and painstaking process that you only want to think about when you have to. However, if done well, retirement planning can be an exciting exercise that increases your chances of aging gracefully.

Questions for Discussion: What other issues should be looked at in retirement planning? What’s the best thing you are doing now to make a good life for yourself later?

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