After decades in the rat race, you’ve done your time. You’re excited to clock off for good and start all those projects you’ve always dreamed of. Then the pandemic hits. Interest rates are cut and people panic. Where does that leave you?
If this sounds familiar, you’re not alone. Preparing for retirement during COVID-19 may sound scary, but many of the challenges are the same as they’ve always been. It’s all about planning.
Here are our four top tips to prepare for retirement in 2021 and beyond.
#1 Assess your retirement needs
Senior Financial Advisor Daniella Rand suggests that knowing your retirement needs is a vital step toward preparing for retirement.
Research on post-retirement spending habits has found that many people believe their annual spending after retirement will only be up to 70-80% of their previous expenses. However, for retirees who face medical hardship or are still paying off a mortgage, this is often unrealistic.
Sit down with a financial planner and create a list of your expenses. A realistic budget is a key to living comfortably in retirement.
#2 Tidy up your debt
As tempting as it is to blow $10,000 on an overseas holiday to celebrate your newfound freedom, one of the smartest things you can do is minimize your debt first.
Debts to clear up are those with the highest interest, such as outstanding credit cards or vehicle loans. Ideally, start trying to consolidate these debts during your last two or three years before retirement and avoid incurring new ones. Also, speak to your credit card issuer to negotiate a lower rate.
If you’ve built up significant debt, speak to a financial planner to discuss your options and create a solution that works for you.
#3 Adjust your lifestyle
For empty nesters with large mortgages outstanding, retirement is the perfect time to adjust your lifestyle. An expensive five-bedroom house may no longer suit your retirement lifestyle. Instead, consider moving into a smaller abode with a more manageable mortgage.
A smaller house doesn’t necessarily mean downgrading – think of it instead of adjusting your home to your lifestyle. For example, large gardens, huge rooms and two stories might have been perfect for raising a family. But as we get older, steep stairs and constant upkeep can become impractical and even unsafe.
Instead, choose a home that fits your new phase. If you love sunsets and drinks with friends, treat yourself to a balcony or a beautiful view. A guest bedroom is lovely to have, but you don’t need three or four.
#4 Work a little longer
If COVID-19 has impacted your spending habits (for example, your spouse may have been let go), working another year may be an option. The longer you can avoid dipping into your savings, the more comfortable you will be in retirement.
To make things more manageable, consider speaking with a trusted supervisor or HR department about phasing into retirement gradually, perhaps by role-sharing or taking on part-time hours for your last 12 months in the workforce. Retirement should be a reward, not a burden. Be smart and start preparing now using the tips above. You’ll thank us when you’re sitting on the beach with a drink in hand!