Retirement is commonly thought of as a time for relaxation. You’ve worked hard during your career and so it’s a period of time that should be spent in bliss.
However, there are a few problems with this idea. Costs of living are rising and standards of living are falling, meaning that pension pots may not go far enough to give retirees the lifestyles that they want. In fact, the current crisis has some pensioners withdrawing money from their nest eggs early, years before they even reach retirement.
But even in better times, without the right financial preparation, your retirement might not look so peaceful anyway. So, why is planning your retirement finances important and what are some of the essential points to consider? Keep reading to find out.
The importance of financial planning for retirement
Retirement is a time that will bring lots of changes into your life: you won’t have to rely on a job, you’ll have more spare time than ever and much more.
While there are perks to this, there are also downsides. You’ll have less security and will be more sensitive to the many uncertainties of life.
Yet even though you can’t predict the future, you can stack the odds in your favour to better protect yourself financially. So, what are some essential ways to prepare your finances for retirement?
How to prepare
- Calculate your number
One of the most important questions to answer when planning for your retirement is: how much do you need?
Calculate this at least roughly, so that you know what figure you’re aiming for and how long it is until you’ll be able to retire. Consider teaming up with a financial advisor – they will help you to navigate this problem better than you could alone. Similarly, life settlement brokers are other financial professionals who can help you decide if selling your life insurance policy could be a viable option for you as you prepare to retire.
- Create multiple income streams
While you will mostly rely on your pension to see you through retirement, it doesn’t hurt to have multiple sources of money in case something unexpected happens.
If you’re over 55 years old, you can use an equity release mortgage to access stored cash in your home. Alternatively, you could start a side hustle in order to create an extra income stream to supplement your pension.
- Clear your debts
Any outstanding debts will hold you back during retirement by reducing your monthly cash flow and how much money you have to live off.
Consider trying the snowball method or avalanche method to clear off debt. No one size fits all, so find a way that works for you.
The bottom line…
A smooth retirement takes proper planning and preparation. Make sure you consider the role that your finances will play in the process to ensure that you can enjoy the retirement that you’ve dreamed of.