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Why Having Retirement Goals Should Be Non-Negotiable by Age 40

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man and woman sitting on brown wooden bench
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Close your eyes for a second. Imagine that you’ve just awakened this morning and today is your sixty-sixth birthday. While for many it may signify that you’ve reached your golden years, you may also come to the revelation that you are officially retirement age. More than likely you have dedicated the past four decades of your life to spending countless hours working for your employer and raising a family.

Now that the ship has sailed you may or may not have fully contemplated life as an empty nester or grandparent. For the first time in your life, it’s just you and your mate or simply you. In an ideal world you have successfully put your kids through college, recently paid off the mortgage on your home, and possibly chipped in for a wedding or two. Have you considered what comfort looks like over the next thirty to fifty years?

Nest Egg

A nest egg is also known as a retirement fund which is an important part of being able to sustain your living expenses once you’ve chosen to part with the stability that a steady paycheck provided you. There are several types of funds out there and each one provides special benefits. Usually, you will need at least two or more of these types of accounts in addition to social security payouts to be comfortable.

The Traditional IRA available at brokerages such as Etrade is a type of account that allows you to invest pre-tax dollars into an account but comes with a few restrictions. For instance, the maximum allowable contribution is currently set at $6,000 annually for adults 49 or younger and $7,000 for those who’ve reached 50 years of age.

Some employers offer other types of plans like a 401k or 403b. These are typically included with your salary and benefits package. Unlike IRA accounts you can choose to invest a certain percentage of your salary each month with no penalties. Also, it’s not uncommon to have an employer match (standard around 3 %), based on tenure, performance levels, or other metrics. An added benefit is that these plans are mobile and you do have the ability to transfer them to another firm if you happen to change employers due to a relocation or higher salary offer.

Vacations

One of the pleasures of working and accomplishing things year-round is the fact that you can look forward to a vacation. Whether your dream destination includes a bungalow in Tahiti, an island in the Maldives, the serenity of Chaing Mai, or a red clay mountain retreat in Sedona there’s nothing like taking a break from the day to day responsibilities and treating yourself.

In retirement, you are the orchestrator of your own symphony. Essentially anything goes and the possibilities are endless. According to a study by RBC Wealth more than 50 million people will reach retirement age over the next few years and traveling is one of their top priorities. But, making sure that you have the funds to cover your travel expenses is crucial because estimates show that the costs are growing exponentially as more hot destinations arise. Cruise around the world anyone?…

Living Expenses

If you’ve planned well during your early years for later on in life then you likely own a home outright, possibly even two which will earn you some nice extra rental income to supplement your nest egg. That leaves almost nothing but annual property taxes, bills, and other living expenses each month to pay aside from basic maintenance and upkeep. With the rise in popularity of midtown luxury apartment complexes, you may even choose to rent your home out and enjoy some city living. Most dwellings provide easy access to restaurants, shopping, parks, theatres, museums, and many other activities just walking distance from home.

It’s also important to acknowledge that an improperly planned retirement can lead to financial strain. As recently as 2020, an article published by CNBC estimates that at least twenty-three percent of retired couples cannot afford daily expenses. That means a rising part of the population is staring poverty in the face by the mere fact that their social security alone is not enough to cover their lifestyle needs. You can take action now to ensure that you don’t have to worry about your dream retirement becoming a nightmare.

Bucket List

The bucket list is literally a list of all of the once-in-a-lifetime things you want to accomplish before your last days. It can be anything ranging from going skydiving for the first time to owning your own business to reaching financial independence. No matter how crazy or silly it may seem the idea is to live it up.

As the world endures a second year of the coronavirus pandemic even with the approval of not three but four vaccinations on the horizon, there are still several thousand people losing their lives to the illness each and every day. Some of those who’ve succumbed literally walked into the hospital with a sandwich to eat while waiting for care and never made it out. If you are one of the fortunate ones who is approaching retirement age or too modest to consider living out your wildest dreams just remember, at the end of the day, you only live once.

Medical Expenses

No matter what age you are medical expenses by far outweigh any ongoing financial obligation that you will have during your lifetime. Not only do you have to cover your monthly insurance premiums, copays, bills for non-essential services, etcetera but you will have to go it almost alone. Unfortunately, even with top-notch health insurance. According to a recent study by the Centers for Medicare Advocacy, at least twenty-five percent of people who were approved for Medicare a few years ago had an annual income of under fifteen thousand dollars.

With so many insurance options available to choose from it may seem like a sure thing that you will be able to hack it. But with the rising costs of premiums and soaring prescription prices what seems manageable can easily become untenable when it comes to healthcare costs. Based on estimates from Fidelity, retirees spend on average $135,000 to $280,000 on healthcare during retirement years. That equates to nearly $7,000 for a single person to over $13,000 per married couple each year. Planning early for retirement can keep you healthier, living longer, and prevent you from amassing a med school degree worth of debt in those golden decades.

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