As you log on from home or make the daily commute to work, you may envision a time when your job ends and a more relaxed lifestyle begins.[cite::219::cite] While no one wants to wish time away, most people look forward to the days when they can travel frequently or spend more time with family and friends. Retirement is a legitimate financial goal and, depending on which stage of the game you're in, saying goodbye to a successful profession might be a few years, or a few decades, away. Regardless of where you're at in your career, take steps to ensure you have the dollars to support your newfound lifestyle — be it at age 50 or 70.
It's Never Too Early to Plan for Retirement
The best retirement funding guidance is simple: Save early and save often. If you have a 401(k) plan at work or an individual retirement account (IRA), you can systematically funnel payroll contributions or after-tax dollars. With the time value of money, realize that the sooner you get started socking funds away, the larger the pot will be when you decide to retire.
Consider the example of Joe and Jane. Joe begins investing $250 monthly at age 45 into a retirement account that gains 6 percent interest on average each year. Jane does the same but begins at age 25. Both set 65 as their planned retirement age. In 40 years, Jane amasses about $477,000 in savings while Joe piles up approximately $113,000. An earlier start for Jane means a considerable difference in retirement coffers between her and Joe. Jane might even consider hanging it up at 55, having the freedom to pursue her leisurely activities with many good years ahead, and the ability to fund them.
Making Smart Financial Choices
Creating a solid plan isn't as simple as merely saving money. You'll need to stick to your guns and continue to make prudent financial decisions that include:
- Paying attention to interest rates and consider refinancing a mortgage if that move saves you money. Look for the best refinance rates in Arizona. A reduction in interest rate can free up more dollars to add to your retirement plan.
- Setting a budget and staying within its limits while keeping a lid on frivolous purchases. Cutting back on dining out and brown-bagging lunches means more money in hand to achieve your retirement goals.
- Curbing unsecured debt and using credit cards sparingly. High-interest loans can wreak havoc with your budget, reducing or eliminating the amount you can save on a monthly basis.
- Establishing an emergency fund for unforeseen circumstances. Financial planners suggest you save 3-6 months of net income to pay household expenses in the event of a job loss or unexpected medical bills.
Good financial habits start early. From piggy banks to pensions, you're never too young to focus on long-term financial goals.
Cashing In on Your Equity
Your home is likely the largest asset you own. Either immediately after you apply a down payment and close on a home or in the years that follow, the equity built up in the property represents the difference between the market value of the house and what you owe the lender. That asset can fulfill your financial needs in two ways. You can tap home equity to eliminate credit card debt or other unsecured loans. In addition, home equity loans help pay for improvements that ultimately increase the market value of your property.
Borrowing against a home comes with a caution: Using the loan proceeds to make spontaneous purchases and acquiring more debt will throw a wrench into the works of any well-intended financial plan. To keep the program from running off the rails, continue to pay down existing liabilities, control spending, maintain a slush fund, and shop for the top home refinance loans in Arizona.
Early Payoff Means More Freedom in Retirement
Getting to the career finish line sooner than age 65 holds much appeal for many people. Calling it quits when many quality years lie ahead allows early retirees to take those dream trips, buy a vacation home, or turn a hobby into a full-blown passion. The gain won't be without sacrifice, however. Moving to a shorter-term mortgage will necessitate that you make higher payments for perhaps 15 years instead of 30. But the extra cash shaken loose by the refinance can help fund that retirement nest egg and the pleasures that accompany it. Over the course of the loan you'll pay less interest overall and, in today's environment, you may find a much lower mortgage rate than the figure on your current loan.
Find a Strategy That Works Best for You
There's no magic bullet to funding a fruitful retirement. A multi-faceted approach that involves sound financial practices is your best bet to successfully reaching the stage where you no longer have to punch the clock. Craft a savings plan, keep spending in check, pay off the mortgage ASAP, and you'll be well on your way to that cherished goal. Let the National Bank of Arizona staff help you plan a specific strategy aimed at helping you achieve your retirement dreams.