It can be a scary proposition to leave behind the security of a regular paycheck and face the blank slate of constructing your own new lifestyle. Will you be able to support yourself? Will your health hold out? What will you do with all the time?
Of course, you can’t predict the future. You might suffer an unexpected illness that will leave you dependent on caretakers, or an economic disaster that reduces your standard of living. But barring a life-altering event, here are the four cornerstones of retirement security.
- Be prepared. The key to financial security is to have access to enough resources to support your chosen lifestyle. That doesn’t necessarily mean you need a lot of money in the bank. Most of us have Social Security. But if that’s all you’ve got coming in, then plan on living in a very modest zip code. Maybe you will supplement Social Security with a pension. If you don’t enjoy the benefit of a pension, then hopefully you have an IRA or 401(k) to provide additional income. Maybe you will receive rent from an income property, alimony payments or insurance benefits. Also, since you are on a fixed income, you should be paying off debt, not taking on new debt. There are few things that provide a better sense of security than a mortgage-free roof over your head.
- Create a budget. Before you start building your retirement life, you should have some blueprints. First, project what your expenses will be in the coming years. Many people avoid this issue because there are so many unknowns. But you can estimate your housing expense, insurance, car, travel and food costs. Look at each category and come up with a round number for what you’ve been spending over the past few years. Many credit card companies provide a year-end statement that can help you do this. Then think through how your expenses might change. You might choose to spend less money on clothing and kids, but perhaps more for doctors and fine dining. Hopefully, your projected income will be in the same neighborhood as these projected expenses. If not, then you need to go back to the drawing board and reconfigure your plans.
- Focus on your health. The biggest threat to retirement security is a major medical issue. A health problem can jeopardize your financial security, and more importantly, significantly affect your lifestyle. The first step is to sign up for Medicare and purchase an appropriate supplemental medical policy. Then make a realistic assessment of your health and accommodate any physical limitations. Even if you’re in perfect shape, you should age-proof your home with bathroom grab bars, extra lighting, non-slip floors and similar types of modifications to avoid falls or accidents. Also, in retirement you have more time and motivation to eat right, get some exercise, drive carefully and do all the things that will support your health and allow you to live out your retirement dreams.