The worry of keeping your retirement finances lucrative is truly a valid concern. This often has you looking into hiring a financial consultant who can design a savings plan, taking into account your income and your retirement funds requirement, ultimately to advise you on how much to save so that you can enjoy relaxed retirement life.
However, whether you are charting your financial plans yourself or hiring an expert, you must echo your ideas across these key pieces of advice to check the reliability of your decision. This is because, according to a 2015 survey by the White House, inaccurate retirement plans cost Americans $17 billion annually.
Unsplash | Your retirement funds might run out too quickly if you follow the herd into a ditch
Paying off your mortgage before retirement is not always the smartest move
Some people stress upon paying off all their debts before retiring so that there are no income outflows during old age and all expenditure is undertaken for personal leisure. However, experts’ advice is entirely contrary to this.
They suggest that a comparison must be made between the interest rate on a savings account, and interest payable on a loan. If the gains on savings are higher than the interest payable on the loan, it would be wiser to save your income presently rather than trying to pay off the mortgage to maximize net gains.
Assuming the retirement age to be cheap
It is a common misconception that retirement is not very costly, considering that you have your own house, and no educational expense to bear. However, this way we grossly underestimate and misinterpret our expenditure. Many people put off their travel plans for when they retire, which means they should have enough funds to cover their travel packages or any expensive hobby they plan to undertake to spend their years productively.
Additionally, there is always a possibility of unseen expenditures that can appear in all forms such as health complications, or natural calamities and incidents which may not always be covered by insurance policies, hence require you to spend dollars on them.
Unsplash | Expenses come unannounced and can put a big dent in your wallet
Demanding social security benefits too early
Many people are misguided into believing that social security benefits should be demanded as soon as one turns 62. However, experts reveal that this could be a folly because the amount of your check will be reduced if you claim them before your Full Retirement Age (FRA). Additionally, if you file for benefits at your FRA, that is at 66 or 67 years of age, you are also entitled to a bonus amount over and above your full retirement allowance.
However, there remain two opinions about the best age to file for social benefits. It all depends on your situation. If you think you have enough reserves to last you your lifetime, you could do well to demand your retirement funds earlier so that you could spend generously on yourself. Likewise, if you are ill and do not expect to live a long life, why delay your receipts?
On the other hand, if you have low reserves of savings, and you expect to live a long and healthy life, the expert opinion is to delay receiving your benefits till your FRA so that you get big fat cheques for your old age, without falling into financial constraints.
Unsplash | If you wish to travel the world after retirement, best start saving smartly
Whatever approach you take after analyzing your situation, we hope you act wisely so that you get all the peace and contentment you so desired in your youth and delayed till your old age.