Raising a child can cost several hundreds of thousands of dollars, and that’s not including the cost of paying for college. In modern times, many parents are taking additional financial burdens like helping them pay for things, repaying their debt, or letting them move back home. Your bank account may start to feel like a family savings account that your kids have access to whenever they need it.
Preparing them for your impending retirement could be an uncomfortable conversation, but it’s necessary. Your children need to understand how things will change for them when you are preparing for retirement, especially if you’ve helped them. That will get them prepared for the changes and allow them to plan as well.
How to Start Preparing for Retirement
The best retirement plans are always those that you have started early on in life. Ideally, you have been saving for retirement since your 20s to prepare for this moment. Financial planning for retirement can come even sooner if your parents started saving before you turned 18 on your behalf.
Even if you haven’t, there are ways to make up for the lost time. Catch-up contributions for 401k and IRA plans allow you to invest for retirement with a higher limit. Take advantage of these programs to bulk up your saving for retirement funds.
Another piece of sound retirement advice is to pay off as much as your debt as possible. Once you are on a fixed income, you’ll appreciate having more funds to reserve or allocate for other things.
Financial Planning for Retirement
It’s also time to become clear on your retirement needs. Decide whether you will downgrade your home, move to another state, and the other aspects of your retirement lifestyle. Prepare a retirement budget and calculate if you have enough saved to retire on.
Depending on the numbers, you might need to reconsider how many trips you make each year in retirement or buying a second home near the beach. Other things to factor are delaying retirement for a few years or taking on a part-time job to make up for missing retirement savings. It will help your financial planning for retirement.
Retirement Planning for Your Family
As you get closer to retiring, you should start phasing out any financial support you’ve been covering for your kids. The family savings account of your bank account has to end before you retire. It includes things like cell phones, cable bills, and paying back loans. The money you have used to invest for retirement isn’t meant to assist your kids.
As you start preparing for retirement, you should disclose your estate plan. Discussing who will inherit what can help avoid confusion. Sibling rivalry that occurs during a very emotional time as death can destroy those relationships. It’s not uncommon for the child that does the most care taking also to receive the most inheritance.
Prepare and Share the Documents
Estate planning documents should be prepared in advance of retirement. These will identify health care directives, durable power of attorney, and other important topics should you become incapacitated.
Using Retirement Plan Services
Managing your retirement savings is valuable, especially if you don’t have the time to do it yourself. But they can do so much more than getting you on the best retirement plans. Retirement plan services can offer you sound retirement advice on many topics, including preparing your family for your next life stage.
Want to know what other things you should know about preparing to retire? Here are other retirement tips to help reach your retirement dreams below:
Keep your spending under control - Our highest income years usually come later in life. It’s tempting to lease a new luxury car, buy expensive toys, and eat out regularly when you have the extra money. Instead, set aside that extra money for retirement. You will be glad you did as retiring is often more expensive than we expect it to be.
Decide when to collect on Social Security - The later you wait, the more benefit you can receive. Social Security is not a substitute for retirement savings. But it is an additional source of income that’s important to supplement our retirement.
Plan for medical expenses - Healthcare costs are expensive. When we don’t have an employer help pay those expenses, the sticker price is shocking. Medicare has gaps in coverage, so it can’t be relied on alone. Purchase long-term care insurance to cover this gap. If your employer offers a health savings account (HSA), consider taking advantage of the catch-up contribution to increasing your savings.
About the Author
Anjana Paul is a banking professional who is passionate about helping others make better choices when it comes to money. In her spare time she is a freelance writer with years of expertise in the financial industry. She primarily writes about topics such as student loans, building credit, budgeting, retirement and other personal finance topics.