For almost all your life, you’ve been studying hard and working harder. Building a meaningful career is a reward in itself, but there’s another reason that you’re putting in all of this work: so that, someday, you can stop. When you feel that you have enough money earned and that you’ve done what you set out to do in the working world, you’ll retire and — hopefully — enjoy your golden years to their fullest.
But retiring isn’t as easy as it might seem. Simply working hard and saving money isn’t always enough to reach retirement — in fact, it rarely is. Unfortunately, most Americans aren’t saving enough for retirement. More than 40 percent of Americans, some studies say, won’t have anything at all when they reach retirement age. Then there are the people who do save what they think is enough, only to be blindsided by sudden expenses like medical bills and find themselves scrambling for cash.
Achieving comfortable retirement isn’t easy, but it’s a lot easier when you know what your best options for retirement savings and retirement income are. Here are the things you need to know about.
Saving and investing
The core of your retirement fund will come from saving a portion of your salary and then investing it.
Investing is key, because without interest from your investments, you’ll see your cash lose value due to inflation. While savings accounts and other options are okay, the best interest you’ll find will be in stocks and bonds. Just be sure to keep a diversified portfolio and not get too risky with your retirement nest egg. When in doubt, chat with a financial advisor.
The simplest path to retirement is to build up a nice nest egg through saving and investing, and then to draw on that money in retirement. But having no income go to retirement (other than interest on your investment accounts) can be tricky. That’s why having some passive income is such a good idea.
Passive income is any income you earn without actively working on-the-job hours for it. It includes things like stock dividends and real estate income. If you have enough cash, the latter can make a great source of retirement funds. An income property is aptly named, and it will give you income in the form of your tenants’ rent.
Of course, you’ll want to keep things simple so that you can enjoy retirement — if you’re working too hard, you’re not really retired. Be sure to make full use of online landlord software, which you can use to set up a listing and rental application, perform background checks, and more.
Drawing on assets
No matter how careful you are about saving, investing, and generating sources of passive income, there may come a time when you need cash and find yourself short. One common reason for retirees to find themselves in a financial crunch is medical bills, but there are lots of possibilities. At times like this, you may find that your hard-earned wealth isn’t as liquid as you’d like it to be. You have a very valuable house, but you can’t pay medical bills with a house — or can you?
Well, you could, actually, and without having to move out. A reverse mortgage will give you a monthly income in the form of a loan that will be paid back (via the sale of your house, unless your heirs prefer to step in) after you pass away.
Your life insurance policy is valuable, too. Through a viatical settlement, you could essentially sell off your life insurance payout before your beneficiaries receive it. Swapping your future settlement for cash now could be a financial win, especially if you’re facing steep bills that could otherwise trap you — and your estate —6 in the cycle of debt.
Retirement is a beautiful thing, but you’ll need cash to get by. Save carefully and remember your options for growing your wealth and turning your assets into cash.