Defining Your Financial Goal
Happy retirees understand that the purpose of saving is to enable them to enjoy the things they love during retirement. Whether it’s traveling or donating to causes close to their hearts, happy retirees have a goal for their money. They have created a vision for their post-work years. They know they want to see the world, own a cabin in the mountains, start a foundation, or simply farm and read when they’re not spending time with grandchildren. This vision may change over the years for any number of reasons, but when they reach retirement age, happy retirees have a good understanding of how to use their available time and money. In contrast, unhappy retirees lack this vision.
The Purpose of a Wealth Ratio Greater Than 1
The wealth ratio is very simple: it’s the amount of money you have after taxes in relation to the amount of money you need. Anyone can calculate their wealth ratio. Just take the monthly amount of income you should have or need to have in retirement (social security + pensions + any additional sources of stable income), including what your nest egg should generate, then multiply it by one minus your tax rate, and divide the result by what you expect to spend each month to live the retirement you desire: assets / needs = wealth ratio.
Making Mortgage Repayment a Priority
Happy retirees have either paid off their mortgages or are only five years away from paying them off when they retire. In contrast, there is a large percentage of unhappy retirees who have 10 years or more left until their homes are paid off. So, if you’re planning to move in retirement, buy a home you can pay off completely so you’re not burdened with extra years of mortgage payments. Remember that buying and moving to a new house often comes with moving costs, new furniture, curtains, carpets, cable and TV connections, and so on. Costs can add up quickly.
And before you decide to make a kitchen renovation or a finished basement to make retirement more enjoyable, remember that every home improvement project has a very strange way of leading into another project. Before you know it, you’re in the midst of a major renovation and a large chunk of your retirement nest egg may be gone. Avoid this by making major home improvements (and repairs) before you retire.
Be cautious when borrowing against your home equity to pay for home improvements. If you fail to repay a home equity loan, you risk losing your home through foreclosure.
The same applies to other types of debt as well. If you still have student loans, car loans, or credit card debt, make a plan to pay off as much of the balance as possible. This way, more of your retirement income can go towards helping you create a happier lifestyle in the later years.
Conclusion
Planning for a happy retirement is something you can achieve if you know where to focus your time, money, and energy. Build an investment portfolio designed to meet your income needs. Start by accurately estimating your retirement expenses and eliminating as much of your debt as possible. These actions can help build a strong financial foundation for the long term.
Source: https://www.thebalancemoney.com/common-mistakes-unhappy-retirees-make-4125576
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