Retiring is a big deal. It’s the thing you have been working toward your entire adult life, squirreling away money from each paycheck for decades. And I wish it was as simple as saving money, but it’s more complex than that. There are many financial goals you need to meet and many financial skills you need to learn before you are able to retire. Also, there are roadblocks. If you want to retire you need to either avoid or overcome these three financial roadblocks:
1) Debt
If you have consumer debt and/or a mortgage leading up to retirement you are in trouble. You need to be debt free by retirement, including your mortgage. In retirement you will be withdrawing a lower income, one which is unlikely to be able to support your debt pay down. The silver lining? If you work hard to pay down debt in the 5-10 years leading up to retirement you are in essence living on significantly less income than you are bringing in. This means you’ve effectively broken your dependence on your income. Debt isn’t great, but you can use it to your advantage.
2) Long term care
As lifespans increase, the risk of health issues becomes more and more real. Health insurance only covers so much and long term care can cost upwards of $200 a day. Don’t risk running out of money, protect yourself by purchasing long term care insurance. Similar to life insurance, the earlier you buy this insurance, and the healthier you are, the cheaper the premiums will be. I recommend purchasing long term care insurance in your 50s.
3) Education
Did this last bullet point give you pause? No, I’m not recommending you go to college, although you should pursue your dreams and whatnot. What I’m actually talking about is your kids’ education. Are you currently paying for your kids’ college? Will you still be paying for it in retirement? For your sake, I hope not. Just like other forms of debt, you need to be done paying for college before you head into retirement.
Retirement isn’t a pipe dream, but it does require hard work to get there.
Peter Dunn a.k.a. Pete the Planner® is an award-winning financial mind and a former comedian. He’s a USA TODAY columnist, author of ten books, and is the host of the popular radio show and podcast, The Pete the Planner Show. Pete is considered one of the foremost experts on financial wellness in the world, but he’s just as likely to talk your ear off about bass fishing.