6 financial strategies to help you prepare for living on a retirement budget
Learning how to budget your money wisely will prepare you to survive on a reduced income when you retire. There are several things you can do to prevent yourself from withdrawing too much money from your retirement savings too early. The following tips may help you find ways to save money and plan for your retirement.
Calculate debt to income ratio
How does your debt to income ratio look? The amount of debt you can comfortably carry is unique to you and depends on your overall financial situation. A core question is whether you will have enough retirement income to cover your debt payments – mortgage, student loans (yours or your children’s), credit cards, etc. Work with a retirement professional to find out what your financial landscape looks like, and what you need to do to plan for your retirement. Get your financial life in order.
What can you do in order to save money? Cut your expenses! Do you really need to have a 200+ channel cable TV or Satellite TV subscription? These are luxury things that you could easily do without if you are really serious about saving money and putting more of your earnings toward your retirement savings. If it makes sense with your lifestyle, consider selling one of your cars and pay off the other one. A monthly car payment is a huge expense and one that can really hurt a lot of people financially. If you need two cars, consider downgrading them as well. Purchase affordable used cars that can make it easier on your wallet each month.
Consider a part-time job
Obtain a part-time job to earn some extra retirement income. Having some income makes it easier to pay your tax bill, and can give you additional money to live on, so that you do not start withdrawing money from your retirement savings account too early. If you do not want to go back to work part-time, search for jobs that allow you to work remotely. Having access to your job whenever, and wherever, can make it easier for you to get work done. If you have begun receiving Social Security benefits, keep in mind that if you are younger than full retirement age and make more than the yearly earnings limit, your benefit will be reduced until you reach full retirement age. This may impact whether you work or not.
Downsize your home
If you are close to retirement, downsizing your home and moving to a townhome or condo may make sense. You may reduce your maintenance costs as well as your monthly payment amount. Refinancing your own home is another option to consider if you need to focus your efforts on saving for your retirement, if you have a number of years before retirement. Mortgage rates fluctuate, so it is important to compare the rates often to determine if you are getting the lowest possible rate.
Do you have a lot of unused objects or clutter? Why not sell off some of these items? You’d be surprised to see how much money you can bring in just by selling off some of that old sports equipment from your children or materials from an old hobby. You can choose to sell them on eBay where people bid on them, or you might try a faster method like listing them in your local paper, Craigslist or even hosting a garage sale. Selling off old items is a great way to clean your home and to make some money while doing it.
Some people feel the best way to earn some extra money during retirement is by investing in a rental property. Other people may rent their existing home, or convert their basement into an apartment they can rent. Investing in real estate can be considered as part of an effective retirement strategy.
Using the above tips may help you prepare for retirement so you can more easily transition to living on a fixed budget. Your retirement income may be less than what you are used to. Saving for your retirement is one of the biggest challenges you will face in your life. However, with proper retirement planning and saving strategies, you can get the most out of your retirement years.
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