Five steps to take in the 10 years before retirement – The time to consider your retirement finances is at least a decade before you actually get there.
My husband and I really don’t follow our finances all that well. Our budget works and we don’t have much debt, basically just our home loan, and some money owing on our line of credit from helping our youngest buy her condo. We pay off our credit cards every month. Our kids are in University. With just the two of us at home we’ve noticed some changes with our spending, which got us thinking more about our money. We have an investment advisor at the bank, and we tend to trust her suggestions about how to manage our savings so that we can retire on time. But lately we’ve thought that we should probably take more interest in our money. Where do we start?
Mdm Tan, 49
1. Align your budget with your goals
When a long-term financial goal, like retirement, is decades away, it’s easy to put off aligning our spending to achieve that goal until ‘later.’ One of the best ways to start understanding your money better is to spend time learning how to manage your budget. Take your spending off autopilot and get into the driver’s seat.
2. Avoid letting debt delay retirement
Whether you owe on your home equity line of credit, credit cards, or are still carrying a sizable mortgage, how much you owe can delay your ability to retire. A decade or so before you stop working is a great time to create a plan to pay off what you owe so that you are able to retire when you’d like to.
3. Stagger large future expenses
When is the last time you replaced your sofa, bought new furniture, upgraded your appliances or re-roofed your home? However, in the years leading up to retirement, and especially if you’re a homeowner, your budget needs to include these costs.
4. Invest in your health
Health, vision and dental expenses tend to be more than most retirees anticipate. As you plan for your golden years, ensure that you will have sufficient funds set aside for all the costs you will no longer have coverage for once you stop working.
5. Review legal documents and insurance policies
An important part of managing your finances effectively means planning for what will happen if you become incapable of managing your affairs yourself. Each of us needs to have a will, power of attorney, and possibly a advanced medical directive in place. Each one serves a very specific purpose and is used at different times and for different reasons.
The bottom line on preparing financially for retirement
Start small and don’t be discouraged if something doesn’t make sense right away. Investing time and energy into improving your knowledge around financial topics will ultimately pay off in the long run.
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You can read more about Steps to take in the 10 years before retirement – over at https://theprovince.com/opinion/columnists/five-steps-to-take-in-the-10-years-before-retirement
