It is common for working adults to spend time thinking about what life may be like in their retirement years. You may find yourself dreaming about retirement while stuck in traffic during your daily commute, when sitting in dull business meetings or even while strolling hand in hand with your spouse. For some working adults, there is a strong desire to travel extensively and see the world. Others have the desire to stay closer to home to be with their kids and grandkids, and they may have plans to take up a hobby like scrapbooking, woodworking or golfing.
If you want your retirement dreams to one day become a reality, it is important for you to take action and consider how you plan to fund those dreams. After all, most of your dreams will affect your retirement budget at least modestly, and some dreams may have a considerable impact on how much money you need to save for retirement. Of course, while you want to save money for your retirement years, you don’t want to be cash poor for the next few decades while you fund your retirement account. How can you find a healthy balance between saving for tomorrow and enjoying your current life?
Create a Retirement Budget
The better your budgeting and financial planning skills are, the more likely you will be to hit the nail on the head when it comes to developing a retirement budget. You will need to consider which expenses you plan to have in your retirement years, such as food, gas, medical bills, insurance and other related expenses. Some expenses that you have today, like child-related expenses, a home mortgage and student loans, will likely be gone by the time you retire. Also, estimate how much your retirement plans will cost you. Do you plan to travel?
Do you want to take up a new hobby in your retirement years? How much do you anticipate these activities will cost you? When developing a budget, keep in mind that it is better to estimate high so that you don’t short-change yourself. However, don’t make estimates that are unreasonably high either. Be sure to use online calculators to adjust your figures for inflation and to take income taxes into account.
Consider Multiple Income Streams
You can also use various online calculators to determine how much money you need to contribute to your retirement accounts on a regular basis to meet your goals. If you live in Australia, you should keep in mind that the government has established a minimum contribution amount that most workers must make into a Superannuation fund. Some of the most popular and trusted retirement funds include MLC and AMP. This is a mandated retirement fund that most full-time workers are obligated to contribute to.
If you live in the United States or another country, your contribution to an IRA or 401(k) is entirely elective. Using online calculators can tell you how much your regular contributions into these accounts should be, but what if the suggested contributions are unreasonably high or unaffordable for your current budget? The most important thing is that if you make an effort now to establish multiple income streams for the future, you may not need to contribute such a high amount to your retirement accounts today.
Possible Sources of Other Income
What are a few possible sources of other income that you may benefit from in your retirement years? One option is rental income from real estate investments. For example, you could purchase a few rental homes that generate a net profit for you, and this income can provide you with a relatively stable stream of money. If you invest in the stock market, you may also receive dividend income from your stock investments.
CDs and bonds may also produce income for you. It is important to note that if you plan to enjoy income from any of these investments in your retirement years, you will need to save for them. However, some investments, such as real estate investments, may be leveraged in part with a loan.
As you can see, there are several different options available to you for funding your retirement dreams. Few people dream of spending their sunset years holed up in the house because they don’t have money to really enjoy life on their terms. If you want your retirement dreams to come true, it is important to develop a plan of action today and to work regularly to follow through on that plan. Take time to explore all of the options available to you so that you can determine which option will help you to fund your retirement dream for tomorrow while minimising the financial impact on your current budget.