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4 Steps For Financial Readiness Upon Retirement

When the stress levels at work are unbearable, it’s easy to shout “that’s it, I’m retiring!”. Then you daydream of what you would do if you did not have to work – head to Thailand and drink Mai Tais all day, play golf, watch movies in the middle of the day, etc. But are you financially ready to retire? Did you know that only 4% of Americans have enough capital stashed away for a comfortable retirement? Freak not, you can be part of that 4% if you follow these steps:

Step #1 – Evaluate

Thanks to modern medicine, people live longer today. Longevity is one of the essential factors when planning for retirement. Underestimation can cause people to save too little, retire too early, and spend too much. To complicate matters, retiring early is now becoming the trend. With that in mind, take a look at your life and see where you are right now. Are you a millenial who is looking to the future? Good for you, it’s never to early to plan for retirement. Are you about to retire in a few years?
Whatever stage of life you are, take a critical look at your assets and liabilities. Look at your savings, social security benefits, 401K and other assets. Consider your liabilities too. Will you still be paying for your home long after you retire? List all these down for easy reference.

Step #2 – Set a realistic retirement budget

Once you know where you are right now, the next step is to determine what your future looks like. What do want to do if you did not have to work? Be realistic. You may want to travel for the rest of your life, but if your health is not great, then you may have to scale back your plans. Be honest with yourself. And more importantly, be realistic. Draw up a budget based on your plans. Most people think that their expenses will be less when they retire. But remember, you will have more time to while away. What are you going to do with it?

Step #3 – Streamline your finances

After taking the steps above, you should know by now your financial goals for a happy retirement. Start planning for your retirement NOW. If you have not done so, you should have set aside an emergency fund, a retirement fund and your daily fund. Plan on paying off your all your mortgages before you retire. You should also have a buffer fund, or extra funds that you can dip into if your usual income stream falls short.

Step #4 – Optimize your investments

Even if you have set up all the required funds, you cannot sit back and just wait for the day to come. You have to continue learning how to optimize your current income so that your investments will grow. New and better options will come, so you should always on your toes and jump at every opportunity. It’s better to be over-prepared when it comes to retirement.

Getting ready to retire is an ongoing process. There is no one way to do it. The key is preparation. Make a plan now and stick to it so that you can have a stress-free retirement.