If you hope to retire early, you need to take some vital details into mind.
It isn’t like simply saving money and spending it all on vacation. Retirement planning involves attaining the knowledge on tools and solution that will help one secure all of the possible problems that he or she may encounter during the twilight years.
And through this knowledge, one can now create some strategies that will best address his or her unique retirement needs.
Of course, as we’ve always mentioned, learning more about Medicare Supplemental Plans (otherwise known as Medigap) is important for baby boomers to achieve the future they have always hoped for. This is because, aside from providing policyholders access to medical care and assistance, Medigap plans also provide a practical and flexible approach to managing money during the twilight years.
But that’s just the tip of the iceberg. Integrating strategies based on both health and financial plans will help you prepare for a secured early retirement. And this high level of urgency and thirst for knowledge is what separates prepared boomers from the rest. Let’s find out more below for you and our other readers to best plan for brighter tomorrows:
1) Target for Financial Independence as Early as Today
Having the right mindset on how to manage your funds is essential in preparing for an early retirement.
Think about it: comfort, both in health and leisure activities, is attained if one isn’t bogged down by financial constraints.
But how does one be independent of finances?
Aside from sticking to the golden rule of spending less than what you earn, the first step to take on the journey of financial independence is to keep track of your spending. Yes, every single dollar – even cent – counts.
From monitoring your expenses, you will be able to identify your spending patterns. And by knowing just how much you spend, you can then create ways on how to adjust to save more money.
Regarding how to track your spending, you may want to consider these suggestions:
Online and Mobile Spending Trackers
Tech-savvy folks are in for a delight –spending tracker apps and online sites are available for individuals to use in monitoring their expenses.
An online service that allows users to create budgets, track bill payments, and complete payments. The service also provides credit score access.
Allows users to track a user’s spending patterns by type, location, or month. The app also offers data breach alerts – perfect for individuals who want to keep their identities protected as well.
Helps users calculate the impact of income and expenses on one’s balance.
Allows users to link their bank account and allocate a portion for spending.
Offers an engaging take on financial management, via a built-in finance coach that will remind users on payments and other spending patterns.
Most of the mentioned apps and online sites are free. Please make sure to practice proper online security when using these tools. Your personal information may be asked to help gauge spending patterns and the like.
Also, if you aren’t comfortable linking an app to your bank account, consider looking for a tool that will let you input information manually.
Ask Your Bank
If possible, inquire with your bank if they offer online monitoring of your expenses. This way, you can keep track of your spending without having to consider third-party apps or online means.
Your Personal Spreadsheet
Another way to track your expenses is by making your own spreadsheet. Either by using a computer program or with a trusty pen and paper, being able to write down or manually input data will not only help you monitor your money – you’ll get a great perspective on how you can cut costs by keeping track this way.
2) Longevity is a Big Factor
More than planning finances for the future, acknowledging longevity during the twilight years will help one realize that time is a significant influence on one’s savings.
How is this so? Granted that people today live longer…
- Men: single males have a 50% chance to reach 87; married may reach to 94 years.
- Women: single females have a 50% chance to live up to 90 years old; married may reach up to 98 years.
…having a new way to view retirement must be done.
Aside, of course, from including potential additional years in a retirement plan, identifying possible health conditions during the later twilight years will equip boomers with the proper means and solutions for a safe and comfortable future.
As such, redefining the concept of retirement is needed – even if it means one’s goal is to retire early.
Take into consideration, long term care. As determined by the U.S. Department of Health and Human Services as a form of care that most will receive during the golden years, being prepared for it will help an individual save him or herself from potential financial, physical, and emotional heartbreaks.
To give you an idea of how much the cost of long term care is, here’s a quick snapshot on possible expenses one may encounter during retirement (at a monthly rate):
- Adult Day Health Care Services – $1,473
- Assisted Living Facility Care Services – $3,628
- Private Room Stays in Nursing Homes – $7,698
To help lessen the burden of this essential form of custodial care, consider inquiring about Long Term Care Insurance (LTCI). Relating this policy to a goal of retiring early, applicants can save a lot of money by purchasing a plan as soon as possible. LTCI premiums tend to scale as a person ages, thus, buying a plan at an early age will mean more savings.
3) Saving is Good; Earning is Better
Granted that you’ve taken a proactive approach in monitoring your expenses, considered longevity, and even started shopping around for LTCI coverage – what else can you prepare for an early retiremen?
Consider making more money! Having a single source of income – and managing to make ends meet with it – is important, but having other streams of revenue will help you have that additional safety net should something happen to your primary source of money.
Of course, continuing to work past your designated retirement date (even at a younger age) is possible. It may even have additional benefits, such as better cognitive performance.
But looking for other ways to make more money even outside your comfort zone should be done. Who knows? You may just excel from other means as well!
Investing in the stock market is one reliable way to earn, even during the retirement years. Diversifying your stock options, much like having multiple ways to make money, also offers a safety net to manage your funds.
Should you decide to continue working, try learning how to make money online as well. The convenience of being able to manage your time and resources from the safety of your home is a benefit that most boomers will definitely look forward to. From freelance consultancy work to earning from ad revenue in a website or blog, the means to make money can be done right by your fingertips.
4) Decide What to Do With Your Home
Next, including your home in your retirement plans will help you decide whether to keep it or not.
If you plan to live in your home during the golden years, consider paying your mortgage before retiring. Additionally, and to have an additional stream of revenue, you may also opt to put a room up for your in your house.
Selling your house may also give you additional funds to pursue other dreams or plans during retirement. Low cost lodging may be available elsewhere if you plan to travel the world during retirement.
Moving to a different location, please do take note, also needs to be properly planned. Find out more about the culture you plan to live in during the golden years. Are your necessities provided? Would you have enough money (after selling your house) once you’re in a new country?
These questions (and more) should be discussed before making a big move.
5) Identify and Address Health Care Costs
Lastly, and the most important, focusing on your health may help prevent you from dipping into your retirement funds when you need to pay for emergency medical services and the like.
As mentioned previously in a Commonwealth Fund report, even Medicare beneficiaries feel the pain of still paying for various health care costs.
Just last year, 15 million Medicare policyholders spent approximately 20% o of their income on insurance premiums and out-of-pocket health care charges.
At an average of $3,024 per year for the out-of-pocket health care fees, chances are, if a boomer isn’t prepared, managing funds to pay for these essentials is perhaps the same to juggling knives.
To save yourself from this sort of financial pain, set your sights on expenses that you may need to pay for in the future. Even those fees that you won’t likely face; include those in your plan! Same as keeping track of your spending, these minuscule amounts in health care payments add up – you wouldn’t want to dig yourself out of a hole of financial misery when these costs pile!
And this is also when Medigap Plans shine the best. The basics of Medicare Supplement Insurance policies, when focused upon, directly address these out-of-pocket health care costs. And with ten standardized plans to choose from, applicants are sure that there is a policy that will help pay for the expensive costs.
Bonus: Lifestyle Shift
One of the main reasons that retirement is delayed (whether this is to retire early or not) is because of an individual’s lifestyle choices.
Do you tend to spend more than what you earn on clothes, gadgets, and other short-term goals?
Perhaps you never focused on your health, enjoying delicious food or indulging in drinks and the like?
Maybe you’d like to leave everything up to chance (my friends aren’t planning for retirement yet, then why should I?))
Regardless of the reasons, not being able to commit to a simpler way of life will lead to dire repercussions in the future.
Good Luck With Your Plans!
Whether you plan to retire early or are just looking for more information on retirement, we’d still like to hear from you. Please leave a comment below if you want to reach out to us.