Most American retirees have less than $100,000 on their savings and 401k. The fear of draining out their finances is more prevalent than even the fear of death itself. Social Security won’t be much help, especially once its reserves run out in the next five to ten years. You only have yourself to rely on, and you should be securing your retirement as early as today.
Build Your 401k
Put the maximum amount of money into your 401k as often as you can. Save money while you have it, and try to manage your spending through long-term loans instead of straight-up cash. Just make sure you don’t go overboard with your loans, and try to limit them to essentials like purchasing a home or productive renovations.
If you’re over 50, the 401k system allows you to make up for past contributions by hiking your present ones. You can put in an extra $6,500 per year, putting your annual contribution limit at $26,000 instead of the usual $19,500. Most American retirees live past 82, so making sure your finances don’t dry out after 20 years of retirement should be your top priority.
Invest in a Home
Buying a home early can be the difference between living in comfort and living in squalor. Rent takes up a big portion of retiree incomes, with some forced to move to retirement homes to maintain their finances for a few more years. Investing in a home is one of the smartest things you can do as a young employee or entrepreneur. Opt for a home in the suburbs or invest in a house in more rural states like Indiana or Tennessee. You can use it as a rental property in the meantime and move in when you retire.
Having a home gives you more control over your life. You won’t have to suffer from drastic rent increases, maintenance problems, or face eviction if you can’t pay your rent. Buying a home in the suburbs typically costs $100 to $200 more than what you’re paying for rent in an urban center. Of course, you’ll own the house in 20 to 30 years, and you won’t have to worry about rent once you retire.
Don’t Rely on Basic Medicare
You would expect Medicare to cover medication and hospital stays, but it won’t. Medicare covers only the most basic of services. Quality of life and preventive treatments are excluded, and you’ll only get emergency coverage if your life is at risk. Serious or debilitative conditions that may require palliative care services are not covered, but Medicare will provide hospice care if you only have six months to live. If you want better coverage, you’ll need private insurance. Opt for insurance packages that would cover medication costs and long-term treatments if you have an inkling that you might need them in the future.
Cut Your Spending
Cut down on necessary spendings, like that afternoon latte which you can make perfectly at home. However, don’t hesitate to spend your money if you can make it up in savings. One good example is solar power. If you own a home, solar power systems should be practically free. If you buy them with a ten-year loan, the monthly premiums should be covered by your savings on your electricity bills.
After ten years of payments, you’ll still have free electricity for the next 25 to 35 years. Turn your backyard into a vegetable garden. While raising chicken for eggs might be too extreme for some, planting and tending to a few vegetables should be easy enough to do.
The best way to ensure your financial future is to stay fit. Hospital bills and medical care are the biggest drains on retiree finances, and the leading cause of hospitalization in the US is obesity. 80 percent of hospital visits in the US (pre-COVID-19 numbers) were related to obesity. Illnesses and conditions associated with obesity include type 2 diabetes, heart disease, strokes, liver disease, kidney disease, and many others.
A study by the University of California concluded that obese individuals had an increased expenditure totaling an extra $90,000 in their lifetime. Join a gym, go running, play sports with friends, or eat healthily. Investing in your fitness is one of the best ways to reduce future spending and maintain your quality of life.
Don’t grow old regretting your life choices. Take the time to build the foundation for your retirement early. Take the necessary steps to prepare for what lies ahead. This way, you can ensure you get to live some of the best years of your life once you reach retirement age.