A number of pre-retirees with consistent incomes are not optimistic about their current savings strategy and the effect it will have on their retirement. A survey from 2016 by the Certified Financial Planner Board of Standards reported that 80% of respondents were in some way worried about their ability to save. Roughly 20% of people 50 years and older state they live in a shared household, increased from just 2% four years prior.
Also, as retirement is knocking on your doorstep you’ll have some crucial questions to answer:
- How much will taxes during retirement amount to?
- How will you pay for healthcare?
- What should you do about social security benefits?
- What will happen to your savings in an event you become ill?
Maybe it’s time to think about your retirement strategy so you can ensure you can answer the questions above and avoid having a roommate in retirement. Below we have listed three tips to assist in reviewing your financial strategy for your retirement.
Implement a More Efficient Tax Strategy
For many, taxes can be easily forgotten about. The first of the year comes rolling around and you delay and then rush to get your things to an accountant that can barely offer any relative advice. Though, a year-round planning strategy that entails the utilization of Health Savings Account, deductions, tax-loss harvesting, and 401k deduction techniques can save you close to $5,000 or more in “low-hanging” fruit style tax savings.
Don’t Splurge When You Get A Raise
It’s normal to experience salary increases throughout the span of your career as your expertise, specialization, and skills advance. A piece of solid cash flow management and overall caution is to not increase your living expenses by the same amount.
You must first come to the realization that you never actually get 100% of any pay increase because of taxes. In result, a $10,000 raise more than likely means a real increase of something closer to $7,000-$7,500.
Next, you should strongly think about any increases to emergency savings. Also keep inflation at the top of your mind, which corrodes pay raises over time.
Refinance or Get Rid Of Debt
Majority of retirement strategies will give you fixed income. This means that fixed expenses like a mortgage or car payments can quickly devour your free cash flow. The main goal is to attempt to get rid of all debt before you retire.
At times a refinance can be a great way to decrease the amount of interest and save on a longer-term basis. In other cases, you just need to say the hell with it and pay off the debt.
The last thing you want, after a long, and successful career is to have to share a house or apartment with a roommate that will cramp your retirement lifestyle.