Planning for your retirement can be extremely overwhelming. After all, you have to figure out how you’re going to live off your retirement savings for the rest of your life. How do you know if you have enough saved up? Will you be able to live according to the same standard of living you’re accustomed to? Will you need to continue working on the side?
Below, we’ve gathered some tips for how to make the most of your retirement savings and set yourself up for success.
Utilize a reverse mortgage
If you’re aged 62 or older, live in your home permanently, and have substantial equity in your home – you may be eligible for a reverse mortgage. What’s a reverse mortgage, exactly? It’s a form of financing that converts the equity you already have built up in your home into usable cash you can use however you see fit. For example, you can use it to cover healthcare expenses, pursue your new archery hobby, pay for groceries, or buy new hiking boots for your hiking club.
You can use a HECM calculator to see what kind of loan you may be able to expect.
Plan out your guaranteed income
One of the major forms of income you’ll need when you’re retired is a form (or forms) of guaranteed income. It may come from a reverse mortgage, as we mentioned earlier, which allows you to choose payments in the form of a lump sum or monthly payments or a combination of both.
Guaranteed income may also mean your Social Security benefits. It’s important to note that the size of your Social Security benefit will depend on when you actually start taking the benefit. For example, if you delay collecting until your full retirement age which is usually around 66-67 years old, you’ll receive the full amount of your benefit rather than the reduced amount you’d get if you started receiving them at 62 (when you’re first eligible).
You may also receive a pension that’ll you’ll be able to calculate into your retirement savings. However, with that said, only about 14% of workers receive a pension so you might not have one at all.
Annuities are another option for providing yourself with money to cover basic living expenses and hobbies you pick up during retirement. Essentially, they’re a contract you make with an insurance company that means you’ll get regular paychecks from them for the rest of your life. They come in three forms: indexed annuities, variable annuities, and fixed annuities.
Plan out your flexible income
Nobody can predict what life will bring down the road. As such, it’s incredibly important that some flexibility is built into your retirement savings. You’ll want to make sure your income is diversified so not all your retirement eggs are in one basket so to speak. It’s important to have variety of income sources like stocks that can grow, steady sources of income, and general flexibility so you can withstand different life changes like a sudden health event or the need for long-term care.
In addition, it’s a good idea to plan out a budget so you can manage your expenses that you’re anticipating along with the unexpected ones that pop up along the way.
Plan out your growth
Your retirement savings shouldn’t be static. They need to be able to grow as you age. Of course, there are many factors that you should consider before deciding on the type of investment strategy you need for your retirement. It’s a good rule of thumb to consider a healthy variety of bonds, stocks, and cash but with consideration to your financial situation overall, your tolerance to changes in the marketplace, and your time horizon for retirement.
In general, when you’re trying to plan out the sources of your income and plan for retirement, it’s smart to talk to a financial planner. Not only can they help you sort through the maze of taxes and types of investment strategies you’d otherwise have to parse out for yourself, they can also give you some serious peace of mind.
Retirement doesn’t have to be an intimidating process. As you start to prepare for retirement, it’s important to set aside time to talk to a financial advisor who can help guide you and your spouse so you can enjoy a totally comfortable retirement. After all, you’ve worked hard your entire life, your retirement and golden years should be spent doing what you love and pursuing new hobbies. Whether you choose a reverse mortgage, or an annuity, or a variety of different income streams, you can make your money work for you and your desired standard of living.