If you are looking forward to retirement as a low income earner, you are not alone. Every workers dream is to live their 9 to 5 jobs and enjoy the freedom and flexibility of retirement.
Some studies show that some people will retire with less than $15000 in their savings account.
You need to take specific financial steps to ensure the comfortable and worry free retirement you have always imagined.
In this post, we will be discussing things you need to do before you retire as a low income earner.
Transitioning to retirement can be mentally and emotionally difficult without proper planning.Visualize what you want your retirement to look like as a low income earner.
Financial retirement planning involves some important pieces which cannot be overlooked when planning for retirement.
Proper retirement planning is an integration of your important financial decisions with a coordinating plan to make the most of financial resources in your retirement.
What is retirement planning?
Retirement planning is a dynamic ongoing process which doesn’t stop until your reach retirement. There is more planning to do during retirement than there is to do up to retirement. As personal and financial circumstances change, your retirement plans may change as well.
A successful retirement involves careful planning around financial and non-financial areas of your life. Some of the non-financial aspect includes making sure you’re maintaining faster social connections when in retirement and spending your money in ways that gives you a sense of happiness and fulfillment.
Question you need to ask when you want to retire as a low income earner
- When can I retire as a low income earner?
- How much do I need to retire?
- What do I want to do in retirement?
- Deciding when to take social security or pensions?
- Determining how best to invest your savings
- What types of account and what particular investments do you need?
- Creating a spending plan to make the best use of financial investments as a low income earner
- Deciding on health care and medical insurance options both before and during retirement.
- Making housing decisions such as downsizing to a smaller home or consider buying or renting a second property.
- Making sure you are properly protected against unforeseen legal or medical risk and ensuring you have a place with proper estate planner.
Importance of retirement planning for a low income earner
- Retirement planning helps you create a framework towards having a choice to stop working even as a low income earner.
- There is opportunity to create what you want your retirement to look like.
- Helps determine what you can still do during retirement.
- Ability to ask some important question as a low income earner.
- Ensures taking the time you need to get clear on your reasons for retirement.
11 Things you need to do before you retire as a low income earner
These lists below will lead to the part of successful retirement;
1. Plan your retirement: This starts with deciding to put a plan together. Once you have figured out when to retire as a low income earner, start laying out a solid foundation that will enable you to execute your retirement goals smoothly. A plan will help you develop a checklist that is smart without making any hasty decisions.
2. Know where your retirement income will come from: It is important to review your guaranteed income sources such as social security, existing annuities and pensions. Decide which account to withdraw from and when. Do not forget income generating investments such as IRAs, 401ks, taxable investments accounts and savings account. Understand how social security will impact your income and taxes after you begin claiming it.
3. Avoid lifestyle inflation: As you grow nearer to retirement year, your income is also growing tremendously. A lot of people with changes in financial state are tempted to spend money on unnecessary liabilities. If you are looking towards retiring early, some of the things you can look into is to maintain your budget as a low income earner surviving mostly on minimum wage. Maintaining a reasonable budget before you retire allows you to be flexible in terms of savings and helps you to enjoy a better part of your income when you no longer have to work.
4. Learn how Medicare works: Some employment comes with health insurance. What happens if you no longer serve the company you have devoted your time to? Educate yourself on Medicare and how it works. Understand which coverage gaps you might face and whether your existing providers accepts Medicare. Prepare to have the best coverage for yourself at the price you can afford and learn about your new insurance before you have to use it.
5. Assess your personal savings: If you are fortunate enough, you probably spent most of your years saving money at IRAs or 401Ks. Any thought that involves retiring may require you to assess your balance and see what it actually means. Determine how much you need in a real world financial situations. Having a greater pool of funds in your savings account buys you time until you figure out how your money could be invested into other things that will make it substantial.
6. Apply for a reduced real property tax programme: Since many states across the United States offer some form of tax relief to retirees, it will be great to weigh all the financial options available to you as a low income earner to avoid financial binds that reduce your monthly cash flow.
7. Map out retirement budget: If you are used to following a budget and tracking your spending’s diligently, you have cultivated a positive habit that will help tremendously when you stop working. Before you stop working, create a new budget that details the expenses you are expecting to encounter once your career comes to a close. You may have to tweak your budget as you go along but having one in place will give you a good sense of where you are heading.
8. Develop a strategy for claiming social security: If you are like most retirees, social security will count for most of your large portion of your retirement income. This is a crucial aspect of a properly planned retirement. According to a recent study, nearly 94% of American’s are claiming their social securities ahead of time. The age that you apply for your social securities can have an unfavorable impact on your money. It is better to have a strategy in place rather than going blind.
9. Eliminate high interest debt: High interest debt is one of the biggest threat to retirement budget. Credit card debt can carry an interest rate above 20%. Paying off high interest debt is considered to be highest priority items in enjoying your retirement financially as a low income earner.
10. Figure out what you will do with your time: The idea of having all the time in the world might seem appealing but once you find yourself in that situation, the reality might not be pleasant. To avoid any financial problems in future, make detailed plan of how you will structure your days. Think about what will give you feelings of accomplishments and pleasure once you retire. Make sure your plans are in line with your budgeted income.
11. Consider building a business that will not require a lot of money to start up as a low income earner.
In conclusion, take the time to get clear on the main reason of retiring as a low income earner. Some of your reasons might be because of age, social norms or maybe you want some time to do something you’ve always wanted to do.
Use the list above as a guide for things you need to do before you retire as a low income earner.
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