Everyone is essentially working towards retirement. You want to be able to enjoy the fruits of your labor and spend many years, finally being able to kick back and relax after all that hard work. Some people go about this by trying to climb up the ladder in their careers, while others opt to go into business to be their own boss. Either way, the final destination is the same, and if you want it to be a mostly worry-free transition, you need to hit some specific financial milestones. Whether you are just thinking about retirement in advance to plan or you will already be facing it in some years, these are the aspects that will matter.
A retirement fund worth at least 75% of your income
Consider your 401(k) and pension plan now. You will want to make sure that you are allotting enough money into your retirement that you can hit your goals and be prepared for any shifts in needs like social security benefits and medication. That becomes especially relevant if you plan to move or go on a ton of vacations once you retire. If you are an employee, it is best to check out resources like the Verizon pension plan that covers a lot of the questions regarding balancing your retirement plan.
One of the rules of thumb that experts use is the guideline that you should save enough money to have around 75% to 85% of your pre-retirement income. Then you can estimate your spending and lifestyle accordingly.
Emergency savings that can last you half a year of expenses
Another critical pool of money you want to think about is the emergency savings fund. Although the exact number will depend on your own financial capabilities and general needs, you will want to have a prepared fund in case you do not have a stream of income and need to pay up for a major unexpected expense. Most financial resources recommend having at least half a year’s worth of expenses in the total value of your emergency savings, just for good measure.
It is just the right ballpark to have, and you can start with three months’ worth. While you can always choose to go even beyond the six-month point, if you have the means, experts suggest that you should not go above that rate so that you do not have too much stagnant money that does not get you any tax savings or interest.
Solid health insurance coverage
As you get older, medical expenses become even more relevant. So, you will want to make sure that you have ample coverage. Make sure you get health insurance in the state where you plan to live during your retirement, or at the least the primary place of residence you will have even if you decide to travel around quite a bit. Health coverage is crucial, especially when you need aid for maintenance medication and major conditions. You can explore different programs to make sure that it fits regulations set by the law and within your income range.
A profitable investment
It is a good idea to invest in something that can yield long-term profits, even if it is not particularly groundbreaking. It is better to have this in your arsenal rather than savings alone so that you have a reliable cash reserve and a means to hit your goals in the future regardless of the fluctuating value of cash. There are a vast number of categories to dive into these days, so it is up to you how much risks and benefits you are willing to take on in terms of picking your investments. It is all about strategically picking your ins and outs and keeping things diverse so that you do not put yourself in a tight spot.
Eliminating most debt
If you are still struggling to pay off your debts, then you know you are not in a financial position to retire quite yet. Although you don’t necessarily have to be completely free of debt to comfortably retire (though it is preferable), an excellent mark to follow is that you should not be paying for a debt amounting to over 36% of your pretax income. That number includes credit card debt, auto loans, taxes, insurance, and principal and interest. If you have been able to pay off and consolidate your debts accordingly, then you can more confidently enter your period of retirement.
If you can safely say that you have already hit these marks, then you can safely retire, knowing that you can be financially comfortable for your future pursuits.