Retirement planning is avoided by some people because they fear their financial future may appear unfavorable. However, people who worry about being financially prepared for retirement are very likely the people who would benefit most from retirement planning. They can benefit because planning will show them what actions they can take to make their financial future appear more favorable. If you are ever unsatisfied with the results of your retirement plan, do not get discouraged because there may be adjustments that can be made to improve those results. Let’s review a few strategies that can greatly improve your retirement plan projections.
Saving more money is one obvious way to improve your plan. This means you have to reduce your current lifestyle expenditures, but that may be to your advantage in more than one way. If you can reduce your lifestyle expenditures before retirement, you may discover that your expected retirement need is actually less than previously forecasted. Also consider that some expenditures may disappear in retirement, such as supporting children, paying a mortgage loan, and spending on job-related expenses. If you reduce the expected level of retirement expenditures, then you will likely need less accumulated savings for retirement. So although you will save more money before retirement, the necessary amount of savings may not be as high as you think.
Delaying retirement is another way to improve your plan results. Retiring at an older age may provide more years to save and may reduce the number of years of your retirement need. Of course, we cannot know the exact number of years of retirement need since age of death is unknown. With the delayed retirement option, you can benefit your plan without having to increase annual savings or decrease annual spending, before or after retirement. An in-between option can be to include some income from a part-time job after retirement. This extra income may not allow you to totally delay retirement need withdrawals, but it can reduce the amount of withdrawals needed during your early years of retirement, providing your investments more time to grow.
Downsizing your estate can also improve your plan results. Selling assets outside of your investment portfolio can provide additional cash flow into your retirement plan. For many families, a home is their most valuable non-investment asset. Once the children have left home and less living space is needed, you may want to sell your current home, purchase a smaller home, and use the net proceeds for retirement funding. For married couples, a reevaluation of estate needs may be necessary after one spouse dies. Also consider how much inheritance you want to leave to your heirs upon your death. If estate preservation is not a goal, then you may consider liquidating everything you have of value in order to fund your retirement.
Retirement is a reality of life, so retirement planning should not be avoided. You may fear unfavorable plan results, but we have just reviewed a few strategies that can improve those results. Retirement planning will help you better prepare for the future by showing you what steps to take today. Do not delay planning because the sooner you start, the more options you have, and the better prepared you can be.
