5 Ways to Prepare for Retirement Other Than Saving

How to Prepare for Retirement

How to Prepare for RetirementWhen it comes to preparing for retirement, most recommendations you’ll get from experts revolve around some sort of savings goal. In fact, when I googled “how to prepare for retirement,” one of the top results, from the U.S. Department of Labor, was “Top 10 Ways to Prepare for Retirement.” Interestingly enough, every single one is focused in some way to saving money.

But guess what? Saving money isn’t going to solve all of the problems you’re going to come across. In fact, I came across a survey last week that was done in conjunction with an eBook called “The Retiree Next Door: Successful Seniors’ Surprising Secrets” (free until September 30th by the way!). Over 500 retirees were surveyed about a number of different things, but the question that struck me the most was what they have been doing to minimize the risk of running out of money.

And that’s where my tips come in 🙂

Pay Off Your Mortgage

As important as it is to have a nice nest egg saved up, I’d argue that it’s even more important to enter retirement without any debt baggage. The biggest reason is because you’re about to replace your mortgage payment with healthcare costs, which according to Fidelity, will run a retired couple about $220,000 throughout retirement. You may think you’re Superman and that your health will be better than average, but why risk it?

Of course, I’m definitely not telling you to use your retirement savings to pay off your mortgage. It should be in the plan from the beginning. If you’re struggling to figure out exactly what to do, Kiplinger came up with a few that can at least point you in the right direction.

Get Long-Term Care Insurance

Long-term care costs are arguably the biggest threat to your retirement savings. Genworth Financial shows that the average cost of a semi-private room at a nursing home is around $77,000 a year. When you consider that the average retirement income in the U.S. is $31,472 a year, that should frighten you. The reason I’m including LTC insurance in here is because the best time to get it is actually before you retire. The American Association for Long-Term Care Insurance recommends people apply in their mid-50s in order to lock in low rates and avoid the extra costs that come with health issues later on.

And if you know me, you know that insurance is a big thing for me. So you better believe this is going to be at the top of my list as I’m approaching that age.

Learn to Live on a Budget

In the survey I read, only 44% of the retirees questioned said they spend less than their monthly income. Like them, chances are that your retirement income is going to be less than your working income. When I was doing financial planning, the average of what people were looking at was around 80% of their final salary. So if you already know you’re going to be living on less, there’s no better time than now to start learning how to do it. If you’ve never lived on a budget before, it’s not too difficult to learn. In the end, the last thing you want is to run out of money when you’re in your mid-70s and be forced to become a Walmart greeter.

Even after you learn to live on a budget, it’s still hard sometimes to balance living in the present and saving for the future, and that’s something you’re going to need to do even after you stop working. Learn now. Your 65-year-old self will thank you

Find Ways to Earn Passive Income

The most common way most retirees collect passive income is through stock dividends or interest. But it might be good to think outside the box on this one, because the more ways you can diversify your income sources, the less risk you’re going to have. One way is to purchase rental properties. If you can do it early on, you can maybe even have the mortgage paid off by the time you retire. Another way is to run a small business. With the Internet being so handy and all, it really isn’t that hard to start an online business that can provide you with some extra cash.

Prepare to Keep Working

As much as it pains you to think about it, one of the best things you can do for your retirement savings and your health is to continue working in retirement. But instead of searching for Walmart greeter jobs, prepare now to spend some of your retired time doing something you love for a change. The extra money is just an added bonus. Health wise, the more active your body and mind are, the longer they’re going to be of use to you. Spending all your time sitting in front of a television isn’t going to be helpful.

Prepare for Retirement: #YOLO

In all of this, keep in mind that you only live once. And a large part of that life is going to be spent in retirement. As a financial planner, I’ve met with people in their 40s and 50s who are nowhere near ready for retirement, and let me tell you. It scares the crap out of them. One lady in her late 50s broke into tears when she realized she and her husband were never going to reach their goal.

In my mind, everyone deserves a long, peaceful retirement. But no one is going to hand it to you. You’re the one that needs to prepare for it. And you need to start now. Don’t screw it up.

(photo cred)


13 thoughts on “5 Ways to Prepare for Retirement Other Than Saving

  1. The first time I retired early I still had $96K on my mortgage but refinancing to 3.75% the payment was easily handled in my retirement budget. Being I live a retire early and often lifestyle I paid it off in 18 months after taking a paying opportunity I was passionate about doing. That said I think I paid off the mortgage based on emotional peace rather than financial reasons as that $96K would most like have made more in the long run than the 3.75% loan payoff gain. No regrets and I have never met anyone who regretted paying of their mortgage. As far as long term care, that is really being pushed and is very expensive. We looked at how are parents and grand parents aged and retired to get an indication of what health and long term health care needs might be. Being from the same gene pool as we had observed is maybe an indicator but its not exact. It seems our family members seem to be pretty independent right-up until the very end. I have a fund to handle shorter term needs if it comes to that instead of buying the long term care policy. Just my opinion on that. If you buy that insurance it is a life long commitment to make the payments because as far as I saw once you stop making payments due to any kind of hardship you can’t know about now the policy is closed and there is no refund of the thousands you paid into it. So check the fine print before purchasing.

    1. Yeah you definitely have to understand the policy as a whole. I guess in the end it depends on how much of your risks you want to manage. That’s the best thing about personal finance. It’s personal 🙂

      I also agree that most situations it might be better to invest than pay off the .mortgage but I definitely think later-year retirement time with more conservative investments would be a much better scenario financially without a mortgage.

  2. Being mortgage free is a great idea. I also think traditional retirement as we usually talk about it will start to be replaced by a hybrid part time work relaxing scenario. People are living a lot longer than before and there is so much more access to different things than before. The “traditional” retirement age of 65 means you might well have 25 more years to live. That’s a long time!

  3. Ben, AWESOME post. People often think that if they’ve got their retirement accounts covered, they’ll be okay in retirement, but there’s so much more to it than that. One of the main reasons we want to be debt free is so that we’ll have a cushier retirement. It’s a lot easier to keep expenses low if you have no debt.

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