The concept of retirement is quickly evolving for Americans, who are no longer ending their work lives in their late 50s and early 60s.
Now, workers are extending their careers for a multitude of reasons: financial hardship, Social Security and pension changes, household dynamics and a need for a purpose. By 2022, more than 27 percent of Ohio’s labor force will be age 55 or older, according to the Ohio Department of Aging.
Do you feel financially prepared for retirement? Ben Feldmeyer, president of the Feldmeyer Financial Group, told this news organization how people can plan for retirement:
1. Make sure to plan early
“My experience is that the most common reason why people can’t retire is … failure to plan. They are too busy or don’t want to take the time to find out financial planning works,” he said.
2. Plan for essentials
“From a basic approach, the math is relatively straight forward. You need to have enough income to meet your “essentials”. Essentials are the necessities – the monthly expenses that keep your life running,” he said.
These include utilities, real estate taxes, car insurance, groceries.
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3. Save for lifestyle and unexpected expenses
Save for the thing you want to do including: traveling, buying gifts, dining out, entertainment, he said. Save for the unexpected as well. “The unexpected are events that could derail your plans. What if you get sick? What if you die? What if you get sick and DON’T die?” he said.
4. Determine how much you need to save
Beyond pensions or Social Security, the rest of retirement savings typically come from investment income. “401(K), 403(b), deferred compensation, Roth IRA’s, are all types of accounts. Then there’s the actual investments inside the accounts: stocks, bonds, mutual funds, annuities.”
Determine how much you need to save, the rate of return you need on investments and how it should be saved, he said.
5. Understand what’s holding you back
Life can get in the way of saving. “There are other reasons why people haven’t saved. Divorce, staying home to raise kids, job transitions, but usually, it’s just spending more than they make. Future generations may be hampered by their student loans. Borrowing money for the college experience, leads some people to start off their working careers in debt,” he said.
Figure out what your essential expenses are, and cut out the lifestyle expenses if need be. “It’s about having a productive relationship with your money and realizing that you can’t spend more than you make,” he said.