Most working people are not destined to retire well because social security can barely keep up with the rising cost of living and the transition from traditional pension plans to the modern 401 (k) plans has not gone smoothly. Once old-style pensions, based on a guaranteed lifetime, worked well if they were well managed. Today, people with little financial knowledge are left to fend for themselves.
So, in order to retire well, you will have to figure out how to save and invest for retirement. Yes, by all means, use a 401 (k) vehicle if that’s available to you and learn how it works. Still, besides learning how to use the 401 (k) and hoping that your social security income will work out for you, here are a few other things you can do to make sure that you retire comfortably:
- Get Burial Insurance
It’s fairly easy to understand the basics of burial insurance. It’s a life insurance policy, very similar to universal life insurance, that will cover you until the age of 100. By purchasing this policy, you will relieve your family of the burden of your final expenses.
Meet with an independent insurance agent and look over final expense insurance plans, which, incidentally, all come with permanent coverage. Once you find one that suits your situation, enroll in it.
You will be asked to assign someone who will receive all the death benefit proceeds based on your policy. It’s important to give a copy of this policy to the person you assigned as beneficiary, and, for added security, you can also record the policy number in your estate planning documents.
When you file your policy in a place you consider safe, you should also inform family members so that it will be easy for them to find it.
It’s a good idea to take a look at this policy every five years to make any changes you think are necessary to ensure that you’re adequately covered.
- Start saving for your retirement
The sooner you start saving for your retirement, the better. If you can save 15% of your pay for a period of 30 years, you should be able to retire comfortably. If you can start even earlier, then you will only need to save about 10%.
If you get off to a late start when it comes to savings, chances are that you will have to plan to work past the retirement age of 65 years and to live more frugally. If you are in your 50s and plan to retire by 65, then you will need to save as much as 40% of your income toward retirement. Since this is often unrealistic for most people, the next best thing to do is become proficient in investments.
By speaking with a financial advisor, you will be able to calculate how much it will cost to maintain your current standard of living when you retire. Then, based on these estimations, discuss the best investments for you to create sufficient cash flow during your retirement.
- Buy an Annuity
An insurance product, an annuity will pay out an income. It’s often recommended as a strategy to include in a retirement plan. The advantage of buying an annuity is that it will produce a steady, predictable income for your retirement.
Here are the basics of how it works: after you invest in an annuity, it will pay you in the future. This payout can be in a lump sum at a predetermined date or it can be doled out over a series of dates, paying out every month, every quarter, or every year.
The best way to retire well, then, is to use a wide number of strategies. Consider investing in your company’s 401 (k), providing for your burial costs through insurance, saving a percentage of your income over many years, and investing in annuities.
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