There is an old
saying that states, "If you fail to plan, you plan to
fail". This conveys a principle which is particularly
true in regards to an individual's retirement. Ignoring
the situation is not going to make it go away. Sooner or
later we will all be on the eve of retirement, and by
then it is too late to make the necessary preparations.
The time to act is now. So let's take a look at some
financial factors that should be addressed.
Factors
- Housing
costs. This is typically the largest monthly expense
that an individual has in his budget. If a homeowner
can work to have the mortgage paid off prior to
retirement, then this in turn will free up a large
percentage of funds.
- Recreational
expenses. This topic is often not given enough
attention. When budgets are being created the
temptation is to allot the same amount of money toward
entertainment and recreation as is currently being
used. This becomes a problem during retirement when
individuals want to spend their newly found free time
on extra rounds of golf, Caribbean cruises, and plane
tickets to visit the grand children. Be careful to
think this through carefully while still in the
planning stages.
- Inflation.
It is important to keep this factor in mind during the
saving phase of your retirement plan. If you determine
that a certain amount of money will be needed then it
is important to adjust this figure to cover the cost
of inflation. Failure to do so will result in a
serious shortfall of funds.
- Maximize
social security. Once an individual reaches the age of
62 they become eligible to begin collecting social
security payments. However, the payments will be 20%
less than if a person waits until his normal
retirement age. This age will vary depending on a
person's year of birth. The younger a person is the
later he will qualify for his full amount. If
possible, it makes good financial sense to delay these
payments in order to maximize their full
potential.
- Consider
alternatives. After creating a budget, some people
have concluded that their savings will not be able to
support their desired retirement lifestyle. In these
cases, some tough choices need to made. A couple of
possible alternatives are to delay retirement for a
period of time, or to scale back on living
accommodations.
Retirement may
be many years down the road, but it is wise to begin
preparing for this event now. Although the proceeding
list of considerations is not all inclusive, it is none
the less, an important core of factors that demand
careful attention.
