How much money will I need when I retire? The answer to this question is not as straightforward as one would hope for. There are many factors to consider, the most important one perhaps being the length and quality of your life. The average American citizen, regardless of gender, lives around 80 years. If he retires at 65, this means he will need money for at least 15 more years.
If he’s healthy, he will probably live longer, up to 90 or even a hundred. Thus, he will need more money. If he isn’t healthy, he will live shorter. Yet, he will most likely have to spend more money on medical expenses. There’s also the matter of life itself. Do I want the same lifestyle I had before my retirement? Can I live with fewer means? How much am I willing to compromise? What about my family?
The questions are endless, and if you think about them too much, they’ll drive you crazy. Instead, an all-encompassing, honest answer would be, “the more money you have, the better.” The more resources available to you, the better you will be able to deal with your life and the life of your loved ones, no matter what happens.
The best way to maximize these resources is by investing early, as soon as you join the workforce. Three great ones would be your home, financial instruments, and yourself.
Your Home and Other Properties
The best time to invest in a house was yesterday. The second best is now. There are many benefits to buying a house. Among others, a house brings stability to your life. Having a place to live is having one less major problem to deal with in life. Also, a home provides you with a valuable, long-term, exchangeable asset. It can serve as collateral, be repurposed for business, and provide you with a cash source for future needs.
If you already have a house, then invest in another one. But make sure this second home has insurance. A property without insurance is a liability. Instead of providing you with a future income source, it’ll bring you debt and headaches you don’t need.
Long-term Financial Instruments
If you are risk-averse, invest in certificates of deposit or government bonds. They are both good long-term options for people looking for stability. Even though they won’t yield high returns, if you start early, you can make significant amounts of extra money for your retirement. Other tips for starting investors include:
- Find the right partner. Do your research and look at different options. It will help you decide whether to invest in a bank, a state-owned financial organization, or a private company.
- Diversify your portfolio. Decide how much risk you are willing to take and how many years you have. This should be the basis of the instruments in which you invest.
- Manage your expectations. The purpose of investing is not becoming a millionaire, at least not short-term. It is about making your money work for you, earning passive income, and making your life more convenient as you age.
Investing in Yourself
Investing in yourself is the best business decision you can make. The fundamental component of this is health. Healthcare is by far the biggest expense retirees will have. An average couple will spend close to half a million dollars in healthcare after the age of 65.
So start taking care of your health early. Be proactive instead of reactive. Have a balanced diet and engage in physical activity. Both your body and your wallet will thank you for it.
For millennials and other younger generations, retirement is a distant concept, one they don’t need about it. However, it is never too early to start. By looking into buying a property, investing in long-term financial instruments, and taking care of yourself, your golden years will turn into your best.