At the age of 70 or above, it’s unlikely that you’d want to go back to work, or worse, borrow money from whoever you can. The better and more respectful alternative to avert such a financial crisis is to follow those who are doing it right, if not better, i.e., executing a well-thought-out retirement plan.
Remind yourself that you can do better than others instead of sulking with thoughts like “How well am I doing with my retirement plan.”
Strategy to fight off debt and get immune to its menace
One of the most effective ways to treat debt complications is to take them on right from the very beginning. The later you deal with debt, the more complex problem it will pose for you in the future.
Here’s how you can resolve your debt problems with little outside help – I mean professional help.
Debt-busting avalanche method
- The Census Bureau says that the mean American household debt of 65+ olds has doubled since the start of the millennium. It rose to $26,000 within a span of a decade from 2000 to 2011.
- One of the biggest contributing factors to these financial woes is “credit card” or plastic. Moreover, in 2007 alone, households with a 75 year-old at the helm of affairs had more than $800 as a credit card balance. By the end of the same decade in 2010, the same debt figure galloped to the $1,800 mark as unsecured debt, mostly comprising the plastics. With the rate of interest on debt charged at 19.9 percent, the cost per household was a meaty $360 per annum.
- If you can free yourself from the clutches of your credit card debt, that would make your retirement easier and more stable, financially.
- The best way to do this is the avalanche method. That is, pay first toward your credit account that charges you the highest interest rate on your loan balances.
- However, never stop making the minimum payment on the other remaining credit card accounts.
- For instance, you should get rid of a credit card that is charging you 18 percent interest first and move on to the immediate next one, with say, a 14 percent rate of interest.
- This debt repayment process, popularly referred to as the avalanche method, is regarded as the most dollar-friendly as well as fastest way to meet your obligation toward your creditors.
Saving money and stashing cash for retirement
One thing you can do to build up a strong retirement nest egg is to save money wherever possible.
Every penny saved is a penny earned. Though it has become a cliché, we cannot have a better statement than this, at least not when we are discussing ways to have money in retirement.
To start saving money, you can do so in more ways than one. But it has to suit you and must be in line with your present financial circumstances and that of your retirement goals.
In addition to saving money, you should also consider selling assets.
- Once you’ve retired, there are certain opportunities by which you can reduce your living costs and save big. For example, depending on where you live, you can sell off your car. This will automatically cut down on other additional expenses such as car insurance and maintenance that comes with owning a car.
- Reduce your cache of assets by selling them, as they can be a great source of cash during the rainy days. Online auction portals such as Craigslist or eBay allow you to list your belongings and sell them at a handsome price.
- Or collect everything you want to get rid of and have one big estate sale. That way, you can sell everything in one fell swoop.
Rebalancing: The secret to a financially flourishing retirement
Not everything would go as per your plan. So, besides saving for your golden days, it is also important to increase your revenue and safeguard your investment portfolio from potential disasters. These disasters could derail your retirement success at the most crucial stage of your life.
Out of several investment approaches, rebalancing is probably the most important of them all.
It means that as far as your investment portfolio is concerned, you must strike a fine balance with regards to your asset allocations. It is best to have your portfolio rebalanced at least once a year after retirement. This will ensure that you have a permissible amount of money invested in stocks, cash, and bonds, including their subcategories in accordance with your age and risk appetite (tolerance).
You may be wondering, why? The reason is that in case of a market crash, because of your age, you’d have little time to recover whatever you might have lost.
Hence, if you’re cursing yourself at not having your portfolio rebalanced ever before, then it is high time that you drop that habit and take action now. You could stash away a certain amount of your money into a fund that will rebalance your portfolio.
Finally, you need to address a diabolic habit usually associated with new retirees – their tendency to overspend during their first two or three years of retirement.
The expenditures become so much that they surpass their own expectations. The problem further escalates as a retired person may find they suddenly have loads of free time to draw up a wishlist of items or activities that shouldn’t be there in the first place.
This way your money would vanish sooner than you could imagine. So, the best piece of advice here would be to follow a suitable retirement plan and stick to it throughout. Remember, over-the-top retirement will not allow you to keep a sufficient nest egg in order to carry you through till the end.
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