Preparing for retirement is an extremely important task, but one that doesn’t receive nearly the attention it deserves. To set yourself up for a happy retirement, you’ll want to do more than figure out how to just “get by.” After all, no one wants to spend their golden years wondering when- or if- their money is going to run out. Put together a game plan now to pave the way for the most comfortable and happy retirement possible.
Are you wondering where to begin? Follow these five best practices to get you started:
Determine What You Want and Need From Your Retirement Money
The first two questions you'll want to ask yourself are what you want out of retirement and why you need your retirement money. Do you want to travel? Go on new adventures? Purchase a new “toy?” Or are you merely looking to have enough to just live comfortably day-to-day? These are questions that you‘ll want really think about and answer. Having a clear purpose and plan for your money will make it much easier to save the amount you need.
Figure Out How Much You Need To Save
The next step is to figure out how much you need to save, based on the questions you answered above. You’d be surprised by how many people dramatically underestimate what retirement is really going to cost them. The best place to start is to sit down with a financial planner and discuss what you want your retirement to look like. Only then can you determine the best course of action when it comes to saving your money.
Add to Streams of Income
We suggest developing multiple streams of income. In the research I conducted for my book, You Can Retire Sooner Than You Think, I found that lower-income retirees have less than two sources of retirement income, while wealthier and happier retirees have close to three. These sources of income can be in the form of real estate, investment income, and business income. The happier (and wealthier) retirees use these income streams to bridge any income gaps.
Become an Income Investor
One way to create an additional stream of income is through income investing. It's unlikely that your Social Security or 401(k) is going to provide for all the things that you'll want in retirement. Therefore, it’s important to focus on the production of a steady cash flow from the yield of stocks, bonds, and other investments which you can then use as income in your retirement.
Create a Plan To Pay Off Your Mortgage in As Little As Five Years
Another important point I found in my research is that the happiest and wealthiest retirees have either paid off their mortgage or are within five years of paying it off. By getting rid of your mortgage and any other inefficient debt, you will have the financial freedom you’re looking for in your retirement.