Let’s be honest right out of the gate; if you plan to retire comfortably at 55 years old, the list of things you’ll need to do is definitely longer than five entries. However, this article will only focus on what we believe are the most important actions you need to take today (or keep in mind to act on later). And if at this point, you’re wondering if it is feasible to retire at 55, then the answer is a resounding “YES.” However, it involves saving diligently, investing smartly, and making decisions today that help you stay on track financially.
Here are the five most important things you need to be thinking about:
1. Reduce your debt
This one is a no-brainer, and the last thing you want to be doing is paying off debt on a limited retirement income. So, see if you can accelerate your mortgage payments and try to have that done before you retire. Do the same for any car loans or credit card debt. Think of this way: if you’re not paying any interest in retirement, it’s akin to earning some extra % interest on an investment. For example, a 17.5% credit card interest could really add up over time.
2. Plan where you’ll live
This is a multi-faceted decision, so there are no wrong choices. Some people may choose to sell their homes in the city and move somewhere cheaper in the suburbs. Others may stay in the city but move to a smaller home. And for others, there’s a need to retain the house in which they currently live. Whatever option applies to you, consider how it may affect your future expenses. The person buying a smaller home in a cheaper area may have some extra income to save or invest WHILE the person keeping their home may need to make other financial sacrifices to balance things up.
3. Calculate your retirement costs
Now that you’ve put a plan in place regarding debt and where you’ll live, it’s time to move to the next key item on your checklist: monthly expenses. How much will you spend on groceries, utilities, and traveling? Remember, your gas costs may reduce because you no longer drive to work, but your heating bill may rise since you’ll be at home more. Similarly, if you plan to travel after retiring, that’s something you need to plan for in advance. Of course, there may be emergency medical expenses, so that’s something else to keep in mind.
4. Calculate your potential retirement income
Next, do a calculation of how much money could be coming in from your pension plan or Social Security. If you have any investments that are due to pay out after you retire, include those in your estimates as well. The goal here is to see if you have enough coming in to offset the expenses you listed out in (3) above. If you don’t, you need to either cut your costs or put plans in motion to increase your income. One good way to do the latter is through annuities and the guaranteed income they provide.
5. Diversify your portfolio and protect your income
This last step is perhaps the most important of them all, and if you get this right, your comfortable retirement is all but assured. When it comes to investing, there’s a tendency to avoid assets that are deemed risky, especially given how crucial retirement income can be, however, diversification helps you enjoy the best of both worlds. You can spread your capital across stocks, bonds, mutual funds, and indices – and the sharing formula can be based on your risk appetite. By doing this, you ensure healthy returns while protecting your investment.
If you want a retirement product that offers a guaranteed income while keeping your investment protected from stock market fluctuations, consider annuities. Want to learn more about this retirement planning product and how to maximize it? Schedule a FREE 30-minute consultation with our retirement planning expert.