Many people focus on retirement planning as the time to reduce their debt. However, many retirees aren’t sure how to start reducing their debt. In fact, a recent study by the Employee Benefit Research Institute found that nearly half of retired households actually spent more money than they earned during their working years. To minimize your debt load, take proactive measures to minimize the amount of interest you pay and reduce your debt payments.
First, start building an emergency fund. Most people don’t consider inflation risk. But a 3% inflation rate will erode your purchasing power in twenty-five years. As a result, most conservative people opt for fixed-income securities, which may be safer than a more volatile asset class. While this type of investment is a safer option, it may not provide you with the money you need for your long-term spending goals.
Being smart when planning for retirement might also include releasing the equity from your bricks and mortar home and downsizing. This can provide a welcome boost to your pension income. Consider the advantages of downsizing to Gloucester Park Homes for Sale. With lower maintenance costs and reduced energy bills, contact Park Home Life, providers of Gloucester Park Homes for Sale for more details.
In addition, a tax-deferred account will lower your tax bill during retirement. This type of account will allow you to postpone paying taxes on your earnings, and will also produce a compounding effect, which is the best way to accumulate wealth. In the meantime, you’ll have more time to enjoy the fruits of your labour. You can even take early retirement if you have enough money saved.