“The first wealth is health.”
– Ralph Waldo Emerson
We slog throughout our life to acquire an adequate amount of wealth! But why?
Most of us do so just to have a good materialistic and lavish life! And eventually, we fail to pay attention to our health, which is most important!
Today, many older adults are just struggling on how to prepare for retirement and to manage finances in their post-retirement life!
But you don’t need to worry! We are there to help you out with some retirement strategies so that you can relax during your golden days.
Are you prone to overspending?
Till date, you have heard about a general diet which helps to curb yourself from gaining weight! But is there any diet to curb your expenses?
Yes! You can follow the cash diet if you have a tendency to overspend and not saving a single penny! This quirky idea might not be a permanent solution for you but can help you to get back your finances on track!
The rule of thumb is, you need to spend cash while buying anything. Don’t use your cards while going out!
Let’s say, your net income is $1000 and your basic expenses amount to $400. So, the remaining dollars with you will be $600 ($1000 – $600). Now you have got this $600 to spend throughout the month!
In other words, you will get $150 to spend every week! Well, let’s say, in a particular week you have saved $20 from this allotted $150. In that case, you can carry forward this extra $20 next week. Thus you can get $170 to spend next week!
All you need to do in cash diet is managing your cash flow. Once you master this, you will be able to handle your dollars well! And as a result, you will be able to save more for your retirement.
Are you eligible for Social Security benefits?
For funding the Social Security benefits, the Social Security Administration levies a 12.4% tax on earnings (out of which, you have to pay 6.2% and the other half is paid by your employer). You can seek retirement support if you are eligible for the same. It is funded through FICA (Federal Insurance Contributions Act) taxes.
You can collect your Social Security once you reach a certain age or become disabled. But to be eligible you need to earn enough “credits” during your working tenure. From 2017, you will earn one credit for every $1300 on your earnings, up to a maximum of 4 credits in a year!
If you were born in 1929 or later, you need 40 credits or 10 years of work to be eligible for retirement benefits.
And if you are eligible for survivor benefits, you will receive a percentage of the original beneficiary’s Social Security benefit. Usually, that amount ranges from 75% to 100%.
Opt for retirement plans
Financial experts while talking about retirement advice often say to save money for your retirement as soon as you receive your first paycheck! So, here are some retirement plans where you can save money for your golden years!
- > Never miss grabbing the opportunity if your employer is offering a 401(k)! It is a tax deferment plan where you can save and invest for your retirement.
- > One of the important features of this plan is the employer match. It’s the amount which your employer is contributing. The matching is done up to a certain percentage of your contribution.
- > From the year 2019, you can contribute maximum $19,000 per year for this plan. And if you are above 50 years of age, then you will be able to contribute $6000 per year more. Thus your maximum contribution can be up to $25,000 per year.
- > You can start withdrawing once you attain the age of 59 ½ and this will be added to your income. As a result, you have to pay taxes on this amount.
- > Still, if you want to withdraw the accumulated amount before the age of 59 ½ , then you have to pay 10% of the withdrawn amount as penalty along with the applicable taxes.
- > If you are one of the distinct employees of government organizations, public schools, non-profit organizations, etc., you are eligible for this plan.
- > It is also known as a tax-sheltered annuity plan.
- > This plan has got some awesome tax benefits like you can contribute the pretax amounts and to pay taxes on the distribution when you will retire. As a result, you end up paying lower taxes.
Plan your budget
Planning a budget is the baby step for your wealth planning! Note down your income from all the sources along with your monthly expenses. Then chalk out a proper budget to refrain yourself from spending on unnecessary things. But the main challenge would be strictly following your budget. But once you become obsessed with your budget, you will develop a habit of saving. And it will help you to keep aside more dollars for your wealthy retirement!
Are you ready for any unforeseen situation?
Life is uncertain and you might need money if there is any exigency! But you need to be ready to face any kind of unforeseen situations in your life.
According to a Federal Reserve survey, almost 40% of the adults revealed that they won’t be able to cover a sudden expense of $400 with cash!
Isn’t it ridiculous?
Not having a proper rainy day fund might lead you to take out loans during an emergency! And that’s why having an emergency fund is very important.
You can contribute a part of your paycheck for your emergency fund! Most of the financial advisors usually recommend you to have 3 to 6 months’ worth of emergency fund! But post-retirement, you might have to increase it to 12 to 18 months for being on the safe side.
So, it’s highly advisable to keep a rainy day fund to avoid taking out loans to cover sudden expenses!
But, the question remains, where will you keep your emergency fund?
Well, you can opt for a high-yield savings account, where your dollars will be safe and will appreciate with time for better interest rates!
Stay away from debt
Ideally, you should have an emergency fund to cover any sudden expenses. But some situations might arise where you can get out of funds and tend to take out a loan!
So, if you have opted for a loan, try to pay it off at the earliest! Because debts can become an obstacle for you to save money for your retirement! But what if you are trapped with multiple debts?
Well, in that case, debt consolidation can be apt for you! In debt consolidation, you have to negotiate with your creditors to reduce the high (Annual Percentage Rate) APRs of your debts.
If they agree, you can pay off your debts at a much lower interest rate. As a result, you can get rid of your debts easily and save dollars on the interest payments! Utilize those saved dollars for your retirement!
But, what if you are not been able to pay off your outstanding balance amount? And you are short of funds to pay off your debts through debt consolidation too!
Well, if you have not paid off your outstanding balance amount for 180 days, most likely you have started getting collection calls! But, why so? Because creditors usually forward these unpaid debts to their collection departments or sell these debts off to the collection agencies!
In that scenario, you can opt for debt settlement to get out of your debt trap. In this method, you need to negotiate with your creditors to reduce your total outstanding balance amount till date. Once they agree, you can repay your debts by paying a lump sum payment to your creditors!
However, the negotiation process is usually not so easy! Your creditors or collectors might not agree for settling your debts initially. Or they might not agree with your proposed amount for settling a debt. So, you need to explain your situation to your creditors or collectors calmly to convince them for negotiation.
Opt for insurance policies
1. Life insurance policies
Are you in your peak earning years and saving for retirement? If yes, then you might be planning to buy a life insurance policy soon!
But, before buying an insurance policy, let’s have a detailed look at the different insurance plans!
- > Term life insurance: It is the least expensive insurance plan which will cover you for a specified term from 5 years to 30 years! If the insured dies within this term, then a death benefit will be paid.
- > Whole life insurance: As the name suggests, this insurance policy will cover you for your entire life!
Apart from the death benefit, you will get a cash value component too. That’s why whole life insurance is more expensive than the term life insurances! Your cash value component will get a moderate interest rate along with tax deferment too. And you can take out a loan against this cash value if needed!
However, the cash value is a living policyholder benefit. So, you should withdraw this amount once it gets matured!
- > Universal life insurance: If you want flexibility in your premium payment, then you can go for a universal life insurance policy! Make sure to pay the minimum premium amount each year to keep the policy active. However, you might skip a premium payment depending on your accumulated cash value!
And in case your insurer earns more than the interest rate, then they will credit the excess amount to your policy.
Just like a whole life insurance policy, you can take out loans from this cash value component too, if needed!
Health insurance policies:
Are you vulnerable to medical bankruptcy?
According to a CNBC report, the biggest reason for bankruptcies in our country is medical debts! It also stated that almost 2 million people in our country are the victims of medical bankruptcies!
So, health insurance after retirement can help you to protect yourself from the devastating costs of a medical emergency before and after .
Health Savings Account (HSA): Either you or your employer can contribute to your HSA if you are enrolled in a high-deductible health insurance plan (HDHP) as defined by the government.
HSAs have three major advantages:
- > Your contributions to the HSA are tax-free (up to the legal limit). For example, if you earn $50,000 per year and put $4000 in your HSA, then you will be taxed on $46,000! Thus your tax burden will be much lower.
- > Your accumulated interests are tax-deferred!
- > Your withdrawals to pay qualified medical expenses, including dental and vision, are never taxed!
Medicare: This federal program will provide you with health coverage if you are 65 or older or have a severe disability, irrespective of your income! Medicare has four parts and you can pay for the premiums of respective parts accordingly.
Medicare Part A will cover you in the following inpatient services like:
- > Hospital
- > Nursing facility
- > Hospice
- > Home healthcare
Medicare Part B will cover you for outpatient and physician services like:
- > Doctor visits
- > Lab tests
- > Wellness
Medicaid: Based on your income and family size, you may qualify for low-cost care through Medicaid. Health services that Medicaid will pay for in full are:
- > Emergency care
- > Family planning
- > Pregnancy-related services, including assistance quitting tobacco
- > Preventive-care services for children
- > Most other services for children under 18, unless they are in higher-earning households
However, as Medicaid is a joint venture between the federal government and state governments, all state Medicaid programs must meet certain minimum federal standards! And you should be a resident of the states where Medicaid is allowed!
It is a form of property insurance that can cover losses and damages to your home and your assets. Usually, it covers four incidents on the insured property,
- > Interior damage
- > Exterior damage
- > Loss/ damage of personal assets
- > If you or any one of your family members (even your pets) cause any damage to any body.
- > Any one of the listed disasters might cause damage to your home such that you have to shift to another property. The policy will pay out the costs of staying away on other property for the time being.
When you claim on any one of these incidents, you need to pay a deductible. The cost to bring your property back to livable conditions is estimated by a claims adjuster.
If your claim is approved, you will be informed about the deductible you need to pay. The higher the deductible, the lower your premium amount.
Well, a single car insurance policy can help you with various types of coverage. So, before you decide what to buy, you must do a thorough research on which coverage you need!
Liability insurance: It pays for damage and injuries you cause others in accidents. Except New Hampshire, every state requires a minimum amount of liability coverage.
Personal Injury Protection (PIP) or Medical Payments coverage (MedPay): It pays off the medical bills of you or the passengers involved in the accident.
Collision and comprehensive coverage: It pays to fix your car or reimburse you for its current value if it’s damaged beyond repair.
Collision insurance pays out when your car crashes into an object or another car or if it flips over.
Whereas, comprehensive coverage pays out when your car is stolen, or damaged by anything except car accident.
Gap insurance: Are you leasing a car? The leasing company may ask you to carry a gap insurance! If your leased car is damaged beyond repair, it pays off the difference amount between the claim check for the car’s value and the amount you owe on the lease.
Can a dog keep you fit?
“Dogs just make your golden years brighter,” says Jackie Walker, 71, a former retail clothing buyer who now lives in Tampa, Florida.
“Loyal, protective, goofy”
These are the things which come to our mind when we talk about dogs! Our little furry friends are usually frisky and give us unconditional love! As a result, they create a healthy environment around us. You might be surprised to know that a study has revealed that dog owners need fewer doctor visits!
Taking your dog for a walk every day will help you remain active each day. A dog owner while walking his/her dog can walk about 24,000 miles throughout a dog’s 12-year lifespan!
The American Heart Association, while talking about pet ownership and its relation with cardiovascular disease, stated that “Of all pets, dogs appear most likely to positively influence the level of human physical activity.”
And your dog can be a good travel companion too! If you have a small dog, then he/she can travel with you inside the flight’s cabin. And you can choose pet-friendly hotels while going on a vacation!