As our economy is shaken by both local and international events, it’s a good time to consider how to manage our assets for retirement.
Here are five steps that can help you retire into your golden years.
1. Widen your investment portfolio
An important thing to note about retirement is to have enough money before then. To do that, you should start investing in various methods.
A good portfolio includes a mix of bonds, stocks, mutual funds, and other assets. You can discuss with a professional regarding what you can invest in.
With their help, your portfolio should reflect your liquidity needs, risk tolerance, and investment time horizon.
Toni Nasr, Fintech Analyst at Investing in the Web, stressed that the golden rule of investing is to not put all of your eggs in one basket. “Maintain a well-diversified asset allocation that balances portfolio volatility and ensures optimal capital growth,” he said.
2. Use your retirement accounts
Here in Ireland, you can gain access to the National Pensions Reserve Fund (NPRF). This is a public pension with a pay-as-you-go scheme.
You can also look for a private pension to supplement this too. This is on top of the pension scheme that your company provides for you.
Take note that you can only withdraw from your state pension account at the age of 66.
Meanwhile, private pensions would let you pick between the age of 50 to 75 to start withdrawing. However, you can withdraw from this earlier due to illness or your occupation.
Once you start your retirement, you can get a tax-free lump sum from your pension. For the remaining amount, it can be given on an Approved Retirement Fund, an annuity, or an Approved Minimum Retirement Fund.
3. Shrink your debt as much as possible
Do take note that once you retire, you are wholly dependent on the cash-outs from your pensions and retirement funds. Aside from thinking about your expenses then, your debt could eat away from them.
To avoid debt from eating away from your retirement funds, there are two ways you could do this. Reducing your present debt is one, the other is to avoid getting future debt.
For example, if you pay off your credit card debt that can charge 15% interest, you can use that 15% for other things. You can even save that 15% in an account that you can use as an emergency fund.
4. Ask for your estimated retirement budget
If you want to plan more for your retirement, a good way is to get an estimate of what you can get from your investments and pensions.
Aside from asking your pension provider, consult with an accountant regarding how much you can get.
An old rule of thumb you could follow is checking if you can afford spending 4% of your retirement assets every year. This can change depending on your risk tolerance, age, health, and other factors.
Take note that the longer you don’t tap into your retirement assets, the more they can last.
5. Make a list of your retirement expenses
After learning about your estimated retirement budget, think about your expenses as you get older. This includes taking vacations, getting groceries, and celebrating occasions with friends and family.
Even if you have an idea on how much essentials are now, it’s best that your retirement assets exceed this amount due to inflation and other economic factors.
This includes your insurance plans, healthcare costs, and other essential living expenses.
For example, if you want to settle down in a new country, this will also involve any expenses incurred for doing the paperwork up to your retirement house’s mortgage’.
6. Live Below your Means
The rise of credit cards, easy access to loans, and online shopping has made it easier than ever to spend our hard-earned money. But to be prepared for retirement, we need to start living below our means and save as much money as possible.
At the start, living below your means can be difficult. To help out with this, Alan Harder, a mortgage broker, shares his valuable tips:
“…figure out what your regular expenses are and how much of your income you can stash away each month. Once you know your monthly payments, you can make adjustments to ensure that you are living below your means…For example, do you really need that cable or streaming service? If not, get rid of it and put the money you would have spent towards your retirement savings.”
Lastly, Alan suggests contributing at least 10% of your income to retirement savings. As your income increases, consider increasing your contribution by 1% each year.
7. Constantly monitor your cash flow
According to Carl Grande, CEO & Founder of Grand Capital Management, you must have an accurate understanding and awareness of how much money is coming in and how much money is coming out each month.
“Even more than investment returns or strategy, the monitoring and maximizing of your cash flow will give you the clarity and confidence to live the life you want to live without the worry or stress of running out of money.”
Being aware of your cash flow and learning about ways to improve it will give you the best financial outcome in retirement.