Retirement has become an uncertain landscape for many families as they’ve watched economic markets shift and debt grow while financial burdens wreak havoc. But even if you’re in your later years and retirement feels only a few years away, there are actions you can take to plan for yourself and your family. If you’ve got more time and have decades before retirement, you’re in a great position to consider your options today. Either way, the three tips below can help you understand how to plan for your future and provide you with a bit more insight into what lies ahead.
- Assess Your Current Financial Situation
If you’re approaching retirement or planning decades ahead, you should always start by assessing your current financial situation. Lay it all out on the table so you can have an accurate understanding of where you stand. Without knowing where you stand, you’ll skew your future projections. Depending on how organized you are with your money, you may already have an accurate depiction of your budget.
However, it’s important to use a critical eye when evaluating where your money is coming from and where it’s going. Look at the last six months of your credit card statements along with your bank statements to review what cuts to make to reduce expenses. You may have overlooked some auto-pay setups that, when removed, can easily improve your financial situation. Also, consider where you may be actively indulging and create a plan for reducing expenses. For instance, if you regularly order takeout or splurge on delivery services, you will want to create a grocery shopping plan for more home-cooked meals.
Look at your current savings as well. If you do not have enough saved up to cover your expenses for at least one full year, you should carefully funnel your funds into your savings account. One year is the bare minimum for cash you should have on hand to cover your expenses — but it’s better if you aim for three years or more of cash reserves. Life is unexpected. Preparation helps you stay afloat.
- Consider an Annuity
First thing’s first — what is an annuity? An annuity is an agreement that you enter with an insurance company to provide you with a steady income stream that offers financial protection. There are two primary phases you enter when you choose an annuity. The first is the accumulation phase — you make payments, either in a lump sum, in monthly payments over time, or a combination of both. The second phase is the payout phase — when you’re ready to withdraw. When you reach this phase, they provide you with a steady income stream that eases your retirement phase.
There are many types of annuities that you can choose from, depending on what your needs are. However, the most stable of options is a fixed annuity. What is a fixed annuity? When preparing for retirement, high-risk investments don’t have the same appeal. A stable, fixed annuity is one that offers predictability, which feels like a gold mine for retirement and planning your family’s future. Fixed annuities provide you with a fixed interest rate for a specified period. This means that even when the market has entered a state of volatility, your earnings come through at the rate you’ve agreed to.
How an annuity works determines how you receive future payments. The different annuities can be complicated but not impossible to understand. You can choose from several options when you set up your plan with your insurer. For example, you can choose between getting an immediate annuity or a deferred annuity — this is all dependent on how much cash you have on hand to get started and how much time you have before retirement. You can contribute with a single premium or take advantage of flexible premiums if time is on your side. You can also determine how long you’d like to receive payments — whether you’d like a lifetime payout or a payout for a fixed period. A little guidance goes a long way when you’re planning for retirement, which brings up the third way to plan for your family’s future.
- Work with a Financial Professional
If you haven’t kept up to date with financial jargon, some concepts required during your retirement planning process may feel like they’re going over your head. It can feel like a lot to handle, particularly because your well-being and the well-being of your family are at stake. This is a good time to consider hiring a qualified financial professional to explain your options and offer the guidance you need along the way.
A trustworthy financial professional serves as your advocate, helping you navigate every step of your retirement planning process, and explaining technical terms in a way that’s easy for you to comprehend. If you decide to go this route, vet your financial professional carefully. Be sure you understand how their fees work and get a feel for how they communicate. It’s vital you feel comfortable asking questions. The person you hire should be patient, direct, and clear when providing answers.
The three tips identified above aren’t all you need when planning for your family’s future, but they provide a good baseline for you to understand where you are and make a plan for where you’d like to be. The fact you took the time to read this article shows your commitment to ensuring the best outcome for yourself and your family. Keep informing yourself with these critical matters — your future self will thank you.