iQuanti: Retirement represents one of life’s most major shifts. For many, it’s the first time in decades that they are not working for the majority of the day. That also makes it a time for people to enjoy the wealth they have accumulated over the years.
Of course, building enough wealth to create the retirement you want is not a simple process. You’ll need to get clear on your desired lifestyle and set several financial goals, then work toward those goals. To help you out, this article will explain how financial goals work and cover four you should set before you hit retirement.
What are financial goals?
Financial goals entail anything you’d like to achieve that involves your money. That could include buying a home, saving for a child’s college, setting aside a certain amount for retirement, and more. Retirement on its own is a major life change, which brings its own significant financial needs as well. You need to ensure you have enough money to live an enjoyable retirement, minimize taxes, and perhaps leave wealth behind for your heirs.
Set these financial goals before retiring
Retirement can involve significant planning. Set these four financial goals before retiring so you’re financially prepared:
1. Save up an emergency fund
An emergency fund helps tide you over financially and avoid debt in case of unexpected medical bills, an auto accident, or some other emergency. These are especially important in retirement since you will no longer have a predictable paycheck. Many experts recommend saving three to six months of expenses, but you should aim to set aside even more as you approach retirement.
2. Determine your retirement needs
Along with saving for emergencies, you should determine how much you’ll need every month or year in retirement. This helps you see if you’re on track to save up enough for retirement or if you need to increase your retirement contributions. It also enables you to plan for the fun parts of retirement, such as spending more on travel or hobbies.
3. Finish paying off your mortgage
The last debt many people approaching retirement have is their mortgage. Paying this off before or early in retirement can provide significant financial peace of mind for several reasons:
- You eliminate your biggest expense, significantly reducing your monthly spending
- You can save a lot on interest payments
- You can tap into more home equity in retirement if you need additional income
- You can get a reverse mortgage if needed
4. Do your estate planning
We can never know what the future brings. That’s why you should set up your estate plan as early as possible. Estate planning helps you distribute your assets according to your wishes once you pass away. This allows your heirs to enjoy your legacy without the troubles of court and potential family fights. It also lets you document your desires for end-of-life medical care and similar matters.
Set yourself up for a comfortable retirement
Setting financial goals for retirement and working towards them is hard work, but the peace of mind a plan creates is well worth it. Set a goal for an emergency fund and work out your retirement needs to determine how much to withdraw from your assets. From there, consider paying off your mortgage to slash your spending and work with an estate planning attorney to put together your estate plan. Taking these steps will make you feel financially secure as you approach retirement, letting you enjoy your golden years.