The financial needs of people over fifty can be just as varied as the people in this age group are, making it difficult to give one-size-fits-all financial advice. There are, however, a couple of critical steps that anyone who is thinking about retirement should take.
Start with Some Financial Planning
No matter what your current financial situation is, you are going to need a roadmap for the coming years, or a budget. To create one, start by making a list of all of the bills that you expect to pay during retirement. Obviously, this will include all of your utilities, but take a few minutes to think about the debts you have. Eliminate any bills that you expect to have paid off by the time you retire. Also make sure to include money for travel, increased healthcare expenses, and any other activities you plan on enjoying in your retirement.
After making this list, compare the total amount that you will spend on these bills each year to what you are expecting to bring into your household as income during your retirement. Be sure to include all of your sources of income such as Social Security, annuities, pensions, and expected payouts from investments.
Compare Your Lists
Once you have done this, compare the two lists in order to make their totals balance. For many people, eliminating expenses is the easiest way to get these two lists to equal out. Some people may only need to make minor cuts, such as reducing a travel budget, while others may need to make more drastic cuts, such as selling a home that still has a mortgage on it. Other people decide to work for a longer period of time in order to have more income to work with.
Get Out of Debt
Many people discover during this process that they can live on a much lower income than they’re used to if they can get rid of most of their debt before their retirement. For some people, using a part of their retirement savings can be a good option. By paying off their debts upfront, they are not forced to pay interest to the bank, which can be a good investment decision to anyone who has high interest debt. Other people choose to make a few cuts in their budget while they are still working in order to chip away at the debt. This strategy allows them to keep their savings intact.