Many people have spent their entire lives preparing for retirement. When the time finally comes to leave your job, you’ll be able to make significant lifestyle changes and live the life you have always dreamed of. No matter how you intend to spend your senior years, your new lifestyle will require some modifications to your personal finance. Here are 4 simple steps to make sure you are ready.
Step 1: Calculate your income
Once you leave your job, you’ll no longer be receiving the paycheck you’ve been accustomed to for many years. Regardless of whether you’ll be receiving a government or private pension, the amount you receive will play a major role in determining the type of lifestyle you will lead. If you have worked in the United States for many years, it’s likely that you’ve been contributing to social security. On average, US citizens receive about $1,300 a month in benefits. However, some pensioners can receive up to a maximum of $2,600 per month. The actual amount you will receive is dependent primarily on your age and income over the previous 35 working years. The social security agency provides a handy retirement estimator that will help you calculate your exact payments. If you have a privately funded pension, you’ll want to contact your employer to find out the exact amount you will receive. Finally, if you have savings put away for retirement you can contact your investment broker to figure out a reasonable amount of money to withdraw each month. Knowing these costs will help you determine how much money you can spend in your retirement.
Step 2: Determine Your financial need.
How do you plan to spend your retirement? Are you planning to move to a new location? Will you fill your time with new hobbies such as golfing or travelling? It’s important to know how much your new lifestyle will cost. Your calculation should include basic living expenses such as your mortgage payment, food costs, insurance premiums and any other expenses required for day to day life. You’ll also want to factor in any expenses related to how you want to spend your time. Shop around and compare costs for things like golf club memberships, travel expenses, or equipment cost for any new hobbies you may want to take up. If you want to take advantage of the many services offered by retirement communities or homes, call around to find out how much financial outlay will be required. This will ensure that you’re able to afford to do all of the things you want to do, and get the most out of your retirement years.
Step 3: Adjust your mortgage.
Your monthly home payments are usually the largest monthly expense. Now that your income has changed, your mortgage should be changed to suit your new lifestyle. If you are planning to move, it may be possible to sell your home and purchase a more inexpensive residence using only your existing equity. This could eliminate all expenses beyond taxes and insurance. If you are going to retain a mortgage, there are often many financial products available exclusively to retirees. For example, a reverse mortgage can defer all payments until a time when the house is sold, or transferred in ownership. It’s important to use a use a calculator to find out exactly how this service will impact your interest expense, but you can still free up a ton of money with this type of financial product.
Step 4: Enjoy life!
You’ve worked hard for many years; retirement is the time to enjoy yourself. With all of the free time and financial resources at your disposal, you’re now able to do the things you’ve dreamed of your entire life.