Aging with Dignity: How to Plan Your Finances for Retirement

Blog Category: Finance

Aging with dignity is a complicated process that involves two things people don’t like to think about; aging and financial planning. Everyone is aging, though this doesn’t mean it’s something you need to dwell on, especially if you are planning for your future. Here is how you can age with dignity through financial planning for retirement. 

Financial Planning and Aging with Dignity

The Basics of Preparing Financially

The three primary contributing factors to your retirement are your savings, your mortgage, and your health. According to CNBC, 41% of retirees have no retirement savings. This places a lot of stress on Social Security to mitigate the issue.

Another great financial challenge is making sure your mortgage is paid off by the time you retire, as this can make a huge dent in retirement savings as living longer can complicate your planned finances.

Health care is another large cost as you age that often gets overlooked when planning your retirement. The average person will spend $300,000 on health care needs later in life and this number doesn’t include assisted living, skilled nursing, or memory care.

This may all seem pretty scary, and it can be if you fail to plan appropriately, however if you are here now it is likely not too late. There are many ways to build wealth for your future and sometimes the best plans are the simplest. In order to save for your future, try the following:

  • Reduce your debt as quickly as possible by paying off the biggest items first, like your mortgage.
  • Start putting money into your employer’s retirement plans as soon as possible and contribute what your employer will match.
  • Put off retirement to help pay down debts and promote your ability to save more.

Remember that building wealth is only part of your long-term goal. Make sure to protect yourself from losing that wealth or needing to dip into your savings.

Alternative Funding Options

The most common form of retirement planning is a 401(k). However, there are some alternatives to the traditional savings methods. If what your employer offers isn’t measuring up, here are some alternatives

Traditional IRA

One of the most popular ways to save for retirement, a traditional IRA allows you to put money in a tax-deferred account where your money can grow. You’ll only pay taxes when you retire and withdraw the funds.

Roth IRA

A Roth IRA is another way you can save money for retirement, though it is not on a pre-tax basis. Your contributions are made after-taxes and you don’t get any tax savings with this form of account.

Simplified Employee Pension (SEP) IRA

A SEP IRA is specifically for those who are self employed, freelance, or own a business. It has the same investment, distribution, and rollover as a traditional IRA, however instead of having a $6,000 limit you can contribute up to $61,000.

Solo 401(k)

To take advantage of a solo 401(k) you will need to own a business with no employees other than your spouse. However, for those fortunate enough to fall into that category, it is a mighty savings tool. You’re allowed to contribute up to $61,000.

The Early Bird Get the Retirement Savings

Even though there are a few options for those late on their retirement savings, the best solution to ensuring you have what you need is to start early. The younger you start, the better prepared you will be for retirement because you will have more time to save.

Medical expenses can come out of nowhere, and retirement planning can make the difference between outliving your finances and aging well. With this FREE eBook, you can learn the  6 Money Planning Tips for Your Senior Living.