Four financial goals to strive for before retirement
No matter when you are looking to retire, consider setting these money goals to achieve before the big day.
Have enough saved to cover six months of expenses?
You’ve probably been putting away money in retirement accounts or paying toward your pension for a long period of time. But you shouldn’t neglect having a reserve of cash around for emergencies or other unexpected expenses while you're heading into retirement.
Having money immediately available in a personal account keeps you from having to try to hurriedly arrange withdrawals from retirement accounts that may be less liquid. You want your retirement account withdrawals to be well planned, as there may be taxes owed on that money. And if the market happens to be down, that could affect the amount available to cash out now and the amount remaining to use later.
Pay off your home
Home mortgage expenses can take a big chunk out of your fixed monthly retirement income. If at all possible, pay off your mortgage before you retire. That way, you may be able to stretch your budget for the retirement activities you want to enjoy. If you still have a considerable amount left on your mortgage, consider downsizing to something smaller – there will be less to take care of, and any leftover equity might also add to your potential retirement income.
Pay off credit cards
You’ve probably heard it over and over, but paying off credit cards with high balances and high fees is a no-brainer, as those payments sap money from your fixed monthly retirement income.
Yet many seniors continue to carry over credit card debt into retirement when they do not have the monetary flexibility to absorb those expenses. You don’t want your leisure time strapped to monthly payments, so eliminate credit card debt before you retire, and try to make sure you don’t incur more while in retirement.
Have enough in retirement accounts to provide 80% of your pre-retirement income
As a general rule of thumb, you’ll want to have enough saved for retirement to provide income equal to about 80% of your preretirement income times the number of years you expect to be retired. That may be a long time, since the average lifespan is now over 80 years, and many retirees live into their 90s.
Social Security (if you qualify) and other income sources may also factor into the total income amounts you’ll have available to you. Addressing these four financial goals may help you feel more comfortable in making the decision to retire.
The information provided here is for general informational purposes only and should not be considered an individualized recommendation or personalized investment or tax advice.