Four Ways to Fund your Dream Retirement

By: Linda G., Published: Jan 7, 2020 | Related: Social Security Benefits


Many books and articles that you may read about retirement make the assumption that your years leading up to retirement are solely dedicated to personal preparations, but the reality is that these years are often riddled with major life changes. For example, your children may have left home and may be trying to get on their feet as independent adults, and your parents may need an increasing amount of care and oversight. While these and other personal challenges can add to the struggle associated with proper retirement planning, you can still take proper steps to prepare for your own retirement. These preliminary steps will help you to properly prepare for the transition.

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Create a Realistic Dream

Most working adults have a specific dream retirement experience, such as traveling around the world, trekking across the country in an RV or settling down in a fun retirement community. Each dream has a different impact on your budget. You need to define what your dream is and ensure that it is aligned with your spouse’s dream.

While creating a dream, decide where you plan to live in the future. Will you stay where you are at? Do you plan to downsize in the same area, or will you relocate to an entirely new city and state? Consider how close you will be to the family and friends. You also need proximity to retail and medical services. If you plan to travel, proximity to an airport is important. Determining where you will live plays a major role in budgeting because of the cost of living factor.

Prepare a Retirement Budget

By now, you may already have a preliminary retirement budget prepared, but you need to tweak it by adding specific costs related to the type of retirement that you want to have. Compare your current budget with your projected retirement budget to determine how realistic it is. Remember that the best budget is not a hopeful goal. Instead, it is a realistic allocation of funds based on your lifestyle and spending habits. Now is also a great time to trim back expenses and to try to live on less money. Adjusting to a more frugal lifestyle now can help you to stretch your dollar after you leave the workforce.

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Analyze Income Sources

In the years leading up to your projected retirement date, keep a close eye on your income sources. This includes an estimate of your Social Security income, retirement account balances and more. Monitor these income sources carefully to ensure that you remain on track. If necessary, reallocate some of your extra spending money each month to additional savings and investments. Remember that it is better to over-estimate your retirement needs than to under-estimate them.

If you believe that you will fall short of meeting your income needs, remember that delaying retirement can result in a larger amount of money from your Social Security income. It can also give you more time to save additional funds, and at the same time, it means that those funds do not need to last you quite as long.

Understand Your Insurance Needs

If you plan to retire before age 65, you will need to think about the cost of COBRA insurance or private health insurance. Many retirees purchase long-term care insurance before retirement because it is more affordable to buy this coverage earlier rather than later. Some retirees also maintain a life insurance policy through retirement. The premiums for all types of needed coverage should be taken into consideration. While focusing on your insurance needs, be aware that many retirees have increasing medical expenses throughout their retired years. Plan ahead when budgeting for healthcare costs.

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Pay Off Debts

For most adults nearing retirement, it makes sense to pay off all debts when possible. After all, with fewer debts, you can live comfortably on less money each month. However, if you plan to sell your home for downsizing plans and have ample equity already in the home, it may make more sense to allocate additional funds to a retirement account or other investments. Remember that paying off your home is not the only way to live without a mortgage. If you have considerable equity in the home, you can apply for a reverse mortgage. With a reverse mortgage, you can stop paying money on housing, and you can start receiving payments from a lender.

You may have many things going on in your life in the years before retirement that seemingly pull you in all directions. However, preparing for your own future is critical. Remain focused on these points so that you can be as prepared as possible for your retirement.


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