People are living longer and the cost of living in some areas is astronomical. In order to prepare for this stage of your life, financial planners recommend taking some important steps. Here are three important finance steps one should take before you retire.
One of the most important steps to take is to begin nixing as much debt as you can as possible. It may be difficult to organize your debts, but doing so is well worth the effort. There may be debts that you have overlooked as well as debts on credit cards that may be impacting your credit. Most households can see an immediate increase in income by concentrating exclusively on interest on credit card debts. Eliminating some unexpected expenses is another step that should be taken. If possible, you may be able to accelerate payments on debts. In doing so, not only will you save on interest, but you also be able to free up income later by eliminating the highest household debt. Opting to pay cash for debts instead of using a credit card for purchases may save you money on interest.
Calculating your retirement income:
Start calculating your retirement income. Anticipate your future income from all sources. Factor in other incomes you may be eligible such as social benefits. If you have a portfolio, you may assign yourself a monthly allowance to make sure that your portfolio goes a long way. You may have to evaluate your risk profile to consider how much you should be withdrawing. Some go as far as to set criteria for when a withdrawal amount is needed. Investing in long term financial products like annuities can increase your monthly cash-flow for years if managed strategically. Getting another job will increase your household income and help you avoid making withdrawals from retirement income sources that may carry a penalty.
Protecting your assets:
If you have a life insurance policy, you may consider using it as a life settlement. The settlement amount is less than the death benefit. If this is your only life insurance policy, then you may want to consider this only when in dire straits. Annuities are another option. In exchange for a lump sum payment paid up front, you receive a monthly payment for the designated term. Protecting yourself with long term care insurance is prudent in that other incomes are protected if a critical or long-term illness occurs. This form of coverage curbs costs for assisted living, nursing home care and other long-term care costs.
These three steps will help you increase your cash-flow and further protect your assets. Every person deserves an enjoyable retirement experience. Consider discussing your options with a financial expert to better guide your planning efforts.
Yorkville Advisors, LLC is a privately owned hedge fund sponsor.