One of the most complex parts of preparing for retirement is thinking about life where working and building income isn’t the main focus. At times you may become so overwhelmed thinking about saving for an unknown future that you end up not saving anything. You need a road map that can change course if necessary but keeps you headed toward your intended destination.
Before you hit the road, you’ll need to think about what your life might look like in retirement. Then start to estimate how much everything will cost. Since you can’t accurately predict future prices, use inflation as a benchmark—the average inflation rate in the US over the past century (1913-2013) was 3.22%. So it makes sense to plan for higher prices in the decades ahead.
You’ll also want to factor in your day-to-day expenses, like housing costs, food, and healthcare. Some of your current expenses, such as a mortgage or childcare, may no longer exist but could be replaced by new ones.
Some expenses to factor into your calculations:
- Housing costs, including rent or a mortgage, heating, water, and maintenance
- Healthcare costs
- Day-to-day living, such as food, clothing, transportation
- Entertainment, including restaurants, movies, plays
- Travel, including flights, hotels, gas if driving
- Life and/or long-term care insurance
Income you could receive in your post-working years:
- Pension income
- Employer-sponsored retirement plans
- Social security
- Home equity
- Rental property income
- Owned-business residuals
Match up revenue and expenses, and you’ll get a good idea of what you’ll need to set aside for every year of your retirement. If you discover you may fall short, it could be time to look at ways to increase your net worth now. While your investment portfolio is a big part of the net worth equation, it’s not the only thing that can potentially contribute to your financial well-being in retirement. Here are four ways to increase your net worth.
Buy a house: a house can end up being your most valuable asset, and many people do sell their home later in life and use that money to help fund their retirement goals.
Pay down debt: Decreasing debt increases your net worth, so, over time, do what you can to pay down your mortgage, pay off your car loan and reduce any credit card debt.
Remember to save: Earmark funds for the future to systematically go from your bank account into your investments. By doing it this way, there’s no risk of you spending that money.
Invest in the market: One reason to invest is to take advantage of the power of compounding. Over time, that compound growth can boost returns.
Preparing now can make a significant difference when you finally reach your retirement.
As we said, your road map to retirement won’t move in a straight line. Everything from your net worth to your investments to your retirement plan will ebb and flow along the way. Let us help you create a reliable road map. Give us a call at (540) 720-5656.
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Megan Jones joined the ILG Financial team in 2020 as marketing director. Megan and her husband live in Fredericksburg, VA with their German Short Haired Pointer, Gus. Megan is a graduate of Longwood University and holds a degree in communications. Megan is the oldest of Dave Lopez’s three children and not only enjoys working alongside her father, but also with her cousin, Chase, who joined the ILG Financial team in 2020 as an advisor. Megan is also a fully licensed Life, Health, and Annuity agent. When not at work, Megan enjoys sitting on the back porch with family and friends enjoying food and music.
Amy Anderson joined the ILG Financial team in 2023 as the client relations coordinator. Her responsibilities include scheduling of appointments, annual check-up notifications, and annuity and required minimum distribution assistance. She is a graduate of Harding University with a degree in Computer Information Systems. Amy and her husband have two children and she enjoys reading, crocheting, music and spending time with her family.
Terri Center joined the ILG Financial team in 2019 as client services manager. She handles client records, application processing, and gathering information to provide a professional and friendly experience with all of our clients. Terri is a graduate of Oakland University. She is married and has two children. She enjoys hiking, family time, and puzzle challenging video games. She also likes to share her creativity in her canvas paintings and sewing projects.
Jessica Carson joined the ILG Financial team in 2018 as an agent. Jessica and her husband have four children, two dogs, 3 barn cats, 5 chickens, and three parakeets. She indeed loves her children and pets! When not at work, Jessica enjoys playing the piano and cello as well as traveling and spending time outside with her family, hiking, fishing, and boating.
Chase Lopez joined the ILG Financial team in 2020 as an advisor and obtained his