A secure and comfortable retirement ranks high in most people’s priority list as one of the goals we work, save and invest for. While retirement presents an opportunity to lay down your tools of trade and take a back seat, it can turn out to be very unpleasant if you are not prepared for it. Despite all the tools, conversations and resources, a successful transition from the daily workday to retirement bliss constitutes fertile ground for mistakes, particularly if one is unprepared. Once ‘unprepared retirees’ reach this daunting stage, the fact that they are unprepared hits them hard and they learn the hard way that life after work comes with its own challenges.
Here are tips on how to be better prepared when it comes to retirement.
1. Where you live matters
Most people will rush into owning a retirement home regardless of its location or how secure it is for that matter. Proximity and safety breed convenience. You want to be as close as possible to friends and family. Remember, these are your last years. You are probably too old to make long trips every week to go and catch up with friends and family and it will often be inconvenient for them to come visit you on a regular basis if you live far away. Also, security is important as you don’t want to be threatened or forced to defend your property at that age. Where you position yourself matters if you want to make the most of your retirement years.
2. If you don’t fill your day, other things will
Owning a home is good but it’s not everything. Most people plan for retirement by looking to own a house and while it is a major factor, it should not cover up for other priorities and activities during retirement. You are not going to lie in your house the whole day and watch TV and even if you could, it will tire you down. Without a plan to make the most of your daily life in retirement, it’s easy to fall into unproductive ruts and come up with excuses for not seeing and doing new things. So, while you prepare for retirement, remember that hobbies and other activities to keep you engaged during retirement matter.
3. Don’t put all your eggs in one basket
Diversify your income. Diversify. Diversify. Diversify. This will allow you to experiment with new ideas and possibilities and in the process, grow your wealth. The worst thing you can do in this time and age, where probably anything is uncertain, apart from death and taxes, is depend on one source of income. You want to start early and build on multiple sources of income that will keep you covered. The more you diversify your income streams the better, but then again, too many sources of income may beat the purpose. You want to diversify and keep your income circle small so as not to be troubled with keeping track of all the different income streams.
4. Steady and easy does it
Avoid uncertain income. If you’re looking to invest in the public markets, you might want to reduce your exposure in stocks. Leave stocks to the vibrant youth who are still building up their financial capital. In retirement, you want a fixed guaranteed return because of the assured cash flow. You don’t want to be waiting on a dividend payment and the company you are so eagerly waiting on announces it shall barely be paying 2 anything this year, be it they are cash-strapped or want to expand.
If you must, limit your exposure to mature companies and avoid high growth companies that have uncertain cash flows. Steady and predictable income will enable you to plan accordingly in your retirement years and you will scarcely be faced with a liquidity crunch. You might be tempted to forgo steady income in search of a higher return but always remember that stability is key in retirement.
5. Retirement classes don’t exist
No person can teach you how to best retire. The process is not rigid, like most processes in life, and that is why some will retire significantly earlier than others. How, when and why you retire will all possibly come about due to the circumstance you find yourself in. How much you have saved. The alternate sources of income you have. Your priorities in life. The list goes on and on. While you can take in all the advice you can possibly get, you must analyze your situation, what works best for you and be smart about it. After all, everyone should decide what retirement means to them as individuals.
Retirement doesn’t have to be another pain up your backside. The key is to grab the few lessons you reckon work well for you and implement them. Be disciplined. Keep it simple. Saving is not complicated. All in all, planning for retirement is not a walk in the park. However, if you are smart about it, have a plan and most importantly, execute the plan, you will reap the fruits you sow.