If you’re like most people, your goal is to retire with more than enough money to meet your needs for a financially-comfortable retirement. To accomplish this, you’ll need to build up your retirement funds as much as possible. With a solid retirement plan and the following strategies, you can retire in comfort.
How to Make Yourself Financially Comfortable in Retirement
1. Start saving as early as possible
It would be ideal for you to start saving money for retirement while you’re still in high school, but that doesn’t always work out. Regardless of your current circumstances or age, start saving as soon as possible, even if it’s just a little. Getting a jump on it will put time on your side and give you the advantage of having many more years to accumulate a significant nest egg.
How much you should save will depend entirely on your finances and retirement goals. It never hurts to save as much as possible, even if it’s more than you planned for, but don’t deprive yourself in the here and now.
2. Pay yourself first
Your retirement savings should be considered an obligatory bill you must pay with each paycheck you receive. Whenever you get paid, put a set amount aside for retirement immediately, and don’t touch that money. You can place it in a savings account, but make sure it’s a separate account reserved just for retirement. Never mix your retirement funds with your regular savings.
Over time, if you start earning more income, increase the amount of your retirement contributions as much as possible. It will help you reach your goals faster and give you some extra padding.
3. Invest in real estate
Real estate is one of the most profitable long-term wealth generating investment strategies around. If you haven’t already, start building credit so you can get a mortgage with a good interest rate for a desirable property and then turn it into a rental home.
Rental properties require a big investment of your time, energy, and money, so be prepared for that. Or, hire a property management company to do everything for you. For instance, Fort Worth property management company Green Residential takes care of everything for their investor clients, like screening and selecting tenants, collecting rent, making repairs, staying on top of routine maintenance, and fielding emergency calls.
Even if you don’t mind getting your hands dirty and doing the hard work, you’ll benefit from hiring a property manager because they will have extensive experience finding ideal tenants, keeping tenants happy, and preventing avoidable problems.
When you’re a new landlord, you won’t necessarily pick up on the same cues or notice the same signs as a seasoned pro, which can lead to bad tenant choices and problems like unpaid rent and extensive property damage.
4. Create and follow a budget
This is simple advice, but it can’t be overstated. The sooner you start following a budget, the easier it will be for you to collect a large stash of retirement funds. If you feel overwhelmed by the idea of budgeting, start small.
There are several different ways to budget your money, and each method has pros and cons. One of the most common methods is to set aside 10% of your income from each paycheck. However, if you’re already doing that to build your normal savings account, you might not have an additional 10% to add to your retirement account. In that case, either split it in half and put 5% into each savings account, or consider finding ways to increase your income.
5. Avoid frivolous expenses
You’ll have more money to save when you aren’t spending it on things you don’t need. The math is simple. Instead of buying frivolous things, put that money into your savings account. Consider ditching the following expenses:
- Streaming services
- Cable TV
- Frequent extras, like getting your hair or nails done every few weeks. At least cut back on the frequency of these services.
- Buying food out. It’s much cheaper to cook and eat at home.
- Impulse buys.
- New phones.
- Software subscriptions.
- Subscription boxes.
The average American spends around $18,000 per year on frivolous expenses. If you can cut out any expenses you don’t absolutely need, do it. Saving that $18,000 per year will net you a cool $180,000 in just 10 years.
6. Start a business
Whether you’ve always wanted to open up a coffee shop or sell personalized products online, starting a business is one way to grow your retirement nest egg. Launching a business can seem scary at first, but it’s really not that hard. You can hire a legal expert to make sure you get all the proper licenses and permits, which means the most difficult part will be getting customers.
If you struggle with figuring out your market and advertising, you can hire a marketing agency to do it for you. However, that might not be in your budget. In that case, your best resources will be online courses, YouTube videos, and help from people you can meet in person by networking at marketing events.
7. Hire a retirement planner for help
Professional retirement planners can create a fully customized plan for you. There could be things you don’t know about retirement planning, and getting help from a pro will ensure you don’t make costly mistakes.
8. Automate your savings account deposits
If you have direct deposit set up, you should be able to automate transferring a portion of each deposit into your retirement savings account. This could be a simple account that holds the funds until you can move them to your actual retirement account. Either way, setting up an automatic transfer will ensure you never forget and you won’t be tempted to skip the transfer.
9. Take advantage of employer-sponsored investments
Many employers offer 401(k) plans with employer matching contributions. If that’s available, take advantage of it because this is basically free retirement money. It doesn’t make sense to skip this opportunity.
When you open a retirement 401(k), consult with a financial advisor to make sure you set it up correctly. Your boss and coworkers might try to advise you on what to do, but they aren’t necessarily knowledgeable enough to know what they’re doing. However, one thing will always be true – you need to contribute enough to get your employer’s full match. Otherwise, you’re losing out on free money.
10. Move into a smaller home
One thing you can do to generate extra income is move into a smaller house. This can work whether you rent or own your home, but it depends on your circumstances. For instance, you might not be able to downsize if you already have a small home. Even comparable homes might come with a higher mortgage than what you pay currently. You’ll have to crunch the numbers to figure that out.
On the other hand, if you’re renting, you can almost always downsize to get cheaper rent. Although, the amount you can save will depend on your area, the market, and whether or not you’re currently getting a good deal for your home. For example, if you’re paying $1,500 per month for a 1,700-square-foot home when the going rate is $1,800 per month, it may not be worth giving up that deal. On that same note, if you can comfortably move into a 1,200-square-foot home that costs $1,300 per month, you’ll save $2,400 per year on rent, which is $24,000 over 10 years.
11. Don’t take Social Security until you must
It’s no secret that your monthly payouts get bigger the longer you wait to get social security checks. Some people don’t have a choice and need to start collecting social security right when they hit the designated retirement age. However, if you don’t need it right away, wait as long as you can. Even if it’s just a year or two. It can make a difference of several hundred dollars per month.
12. Contribute to a Health Savings Account (HSA)
HSAs are great for retirement because you can use the pre-tax money to pay for qualified medical expenses and then invest the rest. If you don’t use the funds, they roll over every year and can be used at any time in retirement, tax-free, for any purpose.
13. Pay off high-interest debt first
High interest payments are always going to hinder your savings progress. When you have multiple debts, pay the high-interest debt first. This will free up more money to stash away in your retirement fund.
14. Negotiate or consolidate your debt
Getting out of debt should be a priority for the sake of your retirement. You don’t want to be paying back debt once you retire. Do whatever is needed to get out of debt. One of the first things to consider is debt consolidation, which can include negotiating with your debt collectors.
Consolidating your debts will give you one payment to make each month to the consolidation company. That payment will cover the final amount they negotiated to settle your accounts, plus their fees. In some cases, all you need is a $5,000 debt to qualify.
15. Open retirement accounts, like IRAs
Both traditional and Roth IRAs make excellent retirement accounts due to their tax advantages. There are four main benefits to opening an IRA:
- It’s easy and fast and can be done through almost any bank.
- Traditional IRAs accept pre-tax contributions, but have tax-deferred growth, so you don’t owe taxes on your earnings until you start taking distributions.
- With a Roth IRA, you contribute after-tax dollars, so your earnings and withdrawals aren’t taxed.
- You control your IRA account, not your employer. On the other hand, employer-sponsored 401(k) plans can be changed at any time, and if you leave your job, you can’t make any more contributions.
It’s nice to have a mix of both IRAs and a 401(k), but you should be prepared to roll your 401(k) funds into your IRA at some point.
Sacrifices now will create comfort in retirement
Retiring comfortably might require making small sacrifices to ensure you save all the money you need. How much money you save will depend on your ideal lifestyle and goals.
There are many different ways to build a sufficient retirement nest egg, but all methods involve saving money and reducing unnecessary expenses. That doesn’t mean you need to deprive yourself all the time, but you will need to make sacrifices along the way to achieve the goal of retiring comfortably.
