It can be difficult to determine just how much money you need in an average retirement. Some people have a specific amount in their mind and they won’t stop until they reach it.
Others just want to save as much as possible and hope for the best. Still others are just hoping that CPP will kick in and take care of things. Unfortunately, that isn’t always the case.
Look at your living expenses now and attempt to figure out how much you will need to save. If you have credit cards, work out your minimum payments. Find out how much you spend on your home, utilities and all other payments that you make.
Chances are that some of these expenses will continue into retirement. If you want to reach retirement sooner and feel more confident about the amount you have tucked away, you can always start to decrease these expenses.
Consider paying off your home loan. It seems like an impossible dream now, but instead of hopping from one house to another, stay in one place and work hard to pay it off.
If you have some extra money, send in an extra payment. Just be sure to mark it as money towards the principle. Without a house payment, you may see your expenses drop significantly.
Consider paying off your credit cards and other debts. Many people today have tens of thousands of dollars in debt. Whether it is a car payment or a credit card payment, making extra payments or just adding a little to your current payment plan means that these obligations may not be around when retirement comes.
Are there other things that you won’t be paying after you retire? Some companies continue to provide benefits to their employees even after they leave. They may cover your medical insurance or your dental insurance. Find out if these benefits are covered to help you make a plan.
Plan for the unexpected. Life is going to change over the years. You aren’t going to have the same budget once retirement begins. However, there is one thing that isn’t going to change. Something will happen and you will need access to cash quickly.
It could be an unexpected car repair or an unexpected hospital visit. Either way, it is impossible to calculate these expenses in your plan.
Keep a savings account handy. The amount that you want to save is up to you, but better to save too much than not enough. This will give you a safety net in case something goes wrong. If you aren’t ready to retire, this can still be a healthy financial habit to pick up.
If you do foresee any pitfalls headed your way, try to address them before they happen. If you know that you don’t have enough saved for retirement, cut costs now and place the extra money in your retirement account or savings account.
Begin to look for ways to lower your cost of living like reducing the bills that you have now or trading in a new car for a used model that doesn’t require a monthly payment. For the average person retirement may seem far away. But if you plan now, chances are you will have a successful future.
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