Here’s a short list of things you need for retirement.
Your own home. Renters are far more likely to be burdened by basic expenses than home owners. Housing is generally the single highest household cost and thus directly affects the financial security and the ability to accrue wealth for all families. Renters face the threat of having high housing costs affect their ability to pay for other necessities that can undermine their health and well-being especially later in life. According to a report from the Joint Center for Housing Studies of Harvard University, a third of all Americans 50 and over pay more than 30 percent of their income for housing. In addition, 30 percent of renters and 23 percent of owners with mortgages pay more than 50 percent of their income on housing. The result is that those individuals spend 43 percent less on food and 59 percent less on health care compared with households living within their means. They are also unable to save nearly as much for retirement. The result is that older home owners, even those that carry mortgages, have considerably more wealth than renters. Home equity represents more than $111,000 in wealth for the median household and $117,000 in other assets. The median renter on the other hand has $6,100 in total wealth.
A nest egg. A Motley Fool article compares building a nest egg to eating an elephant—you do it one bite at a time. Concentrating on following a plan and remembering your end goal will help you develop the resources you’ll need to pay for retirement. How much do you need to retire? That’s up for debate. What isn’t up for debate is that a good retirement calculator, like the one offered by CNN Money, and possibly a financial planner can help you narrow down what that amount is and whether or not you can relax or you need to put your nose to the grindstone. Spending time looking for that answer is the first step in beginning on the road to retirement.
A plan. On the last day of high school, I stood around with the other students in my class and struggled to grasp that I had finished the first part of my life. Yes, I had more school and of course work but I had spent 12 years reaching for a goal that was always just out of my reach and then anticlimactically I had reached it. I don’t want to flounder in the same way when I reach retirement age so I’ll need to spend actual time thinking about just that. What does retirement look like to me? Will I live in the same town; the same house or even the same country? A 2011 EBRI survey found that 44 percent of people who tried to figure out their financial futures ended up changing their retirement savings plans. Will you be one of them?
Is there more to retirement planning than these three things? Of course. You’ll need to understand health insurance in a way you probably never have before. Social Security will become something other than a line item on your paycheck. Married people will need to know what retirement looks like as both a couple and as a surviving spouse. You’ll need to understand how taking out money from your retirement account will affect your bottom line depending upon which pot of money you withdraw from first. Those are just some of the questions you’ll need answers to 10, 15 or more years before the date your company throws your retirement party and you accept congratulations and a piece of cake before walking out the door. Check out our other articles online about retirement. If you’re ready to make the next step and hire expert help, contact us.