In your early twenties, retirement is barely spoken about. Sure, you might be automatically enrolled into your company pension – but for a lot of people this seems more of a hindrance, than a help. After all, wouldn’t it be so much better to have that extra 2% of your salary available now?
Of course, as time progresses, priorities change. Believe it or not, there does come a time where you start to take retirement seriously – and today’s article is all about this period in question. Bearing this in mind, we will now mull over some of the main considerations you need to think about before you take your retirement.
The “later” expenses
At the moment, you might have your mortgage payment, and perhaps a few credit card debts. One of the biggest misconceptions is that once these are paid off, your monthly expenses suddenly drop. Unfortunately, while this is true, they happen to be replaced by a whole host of other expenses.
Some of these are morbid to say the least. For example, paying for a funeral can be one of them, and can save your family considerable money in the long-term. Others are slightly “happier”, with college fees being the kids being one of these, but the point we are trying to make is that expenses, of different types, are not going to go away.
How much do you need to live off?
This next point links very well with the previous one; just how much do you need to live off for your new-look, retired life? You have calculated your new major expenses, but what about the day-to-day things?
Some people believe that as they get older, they will spend less. Cast aside this thought, and realize that you’ll have more time on your hands and are therefore likely to spend more than during your working life.
How much income will you be bringing in?
The rules on pensions differ all over the world, so we’re not going to delve into that issue too seriously. However, it is important, and you need to find out how much money you will be bringing in. Without this knowledge, it’s simply impossible to understand how much you can afford to pay on your standard expenses, which obviously relates to the other points that we have addressed.
Of course, it might not just be your pension which is contributing to your income. It might relate to any investments you may have, or even savings. Now is the time to understand just how your money is going to work for you, rather than the other way around.
Do you have any debts?Let’s conclude today’s piece on a point about debts. As we all know, the interest associated with debt can be crippling, but as soon as your income drops (as is the case for many) during retirement, these interest payments suddenly feel a bit harder. As such, try and alleviate your life from debt as soon as you can – it will make your retirement more financially tolerable.