If you are one of the ones planning on retiring in the next ten years, there are things you need to know. Examples of what needs to be a priority on your checklist, to achieve your goal, are paying off high-interest credit cards and eliminating those luxurious trips to save. Many people put off saving until its a little too late, focusing presently on short-term goals.
Here is what you need to focus on now.
- A Second Home? Maybe this has always been a dream to own a vacation home but is it smart to invest in this now? Sophia Bera, the founder of Gen Y Planning says, “Owning a second home is usually a financial mistake and could set you off track in being able to retire when you want to.” When Bera worked in traditional financial planning, she said the clients who were snowbirds or who had cabins somewhere and were trying to carry multiple mortgages were often the ones who were behind on their retirement savings. “If it’s not an investment property – that you’re actually making money from – consider selling it ASAP,” she said. “It’s far cheaper to take vacations than it is to own a second home.” She also advises refinancing a 30 yr. mortgage loan to a 15 yr. You will make extra payments while you are still working but will pay off your mortgage earlier.
- Taking out loans for your kids’ education. This can strap you down tremendously if you take out PLUS loans. The kids can take out student loans but you can’t take out retirement loans. Also, limit how much you help your kids financially. She says as your wealth increases, you can help them the best you can. The best gift you can give them is to not have to worry about taking care of you. Research shows that for many people, procrastination plays a big role in hindering retirement planning. On average, we spend two hours a day procrastinating. In our busy lives, it’s often easier to daydream about our future than it is to spend time planning for it. The good news is that if you haven’t begun saving for retirement, it’s never too late to begin. Try taking a small step forward and consider setting aside 1 percent of your paycheck for a retirement account. Or, if you already have a retirement account but you’re saving very little, increase your contribution by 1 percent.
- Cut your biggest expense. Take a closer look at selling your home for a smaller one or renting an apartment. Invest this money in your IRA.
The bottom line is that it’s easy to underestimate the importance of retirement planning. The good news is that with more tools and innovation, people may be better able to achieve the financial future they hope for as they grow older.
Ref. MSN/money, businessinsider.com, blog.disabilitycanhappen.org
Photo courtesy of Bing via calendarbudget.com