Retirement is meant to be the time of your adult life when you don’t have to work, but alas, many can’t comfortably get by in retirement without having a job. According to Statista, almost one-third of retirees still work for cash. There is no shame in this, but it’s also not necessarily ideal.
Let’s look at these moves that are essential to optimizing your financial situation in and ahead of retirement so that you don’t have to go back to work to keep the income flowing in.
Start Saving Diligently Now
If you want to avoid working in retirement, you need to start saving early and always save diligently. If you think it’s too late, rethink that and start saving immediately.
“My best advice would be for individuals to begin saving for retirement as early as possible, in order to take full advantage of compound interest over time and grow your savings over time,” said John Owens, financial wellness expert and EVP of Monterey Financial. “By cultivating the habit of regular saving early on, compound interest can work wonders in growing savings over time.”
Value Employers With Strong Retirement Contributions
You will likely come across many new people in many different professional roles throughout your working years. Commit to those who are committed to your retirement being comfortable.
“Organizations that offer robust 401(k) matching programs or profit-sharing plans are essentially investing in your future,” Owens said. “These contributions can significantly amplify your retirement savings, providing a more secure foundation for your golden years.”
Grant Cardone: Here’s How Wealthy People Invest Their Money for Retirement
Create an In-Depth Financial Plan
No matter where you are in your life, it is critical that you have a thorough, impeccable financial plan in place. You may want to enlist the help of a financial advisor for this task.
“Together you will assess your current state financially before setting realistic goals with clear action steps for meeting them,” Owens said.
Eliminate High-Interest Debt
Step one to avoid working in retirement is to destroy debt ASAP — specifically high-interest debt, such as those imposed by credit cards. This type of debt will eat up your money and only worsen over time.
“Start by eliminating high-interest debt,” said Allegra Moet Brantly, founder and CEO at Factora Wealth. “Make a list of your current debts and their annual percentage rates (APRs). Begin by tackling either the smallest or highest APR debt first.”
Align Your Spending With Your Values
You should already be budgeting regularly and efficiently, and that should entail heavily prioritizing needs over wants; however, retirement is the time to really double down on aligning your spending with your values. Brantly has a helpful tip on how to do this.
“Review your past month’s statements and identify the top three expense categories,” Brantly said. “Determine if these expenses are aligned with your values and make adjustments accordingly.”
Build an Emergency Fund
You may be tired of hearing it by now, but no finance expert is going to skip on highlighting just how important an emergency fund is in all stages of your life, including retirement. Build yours out now and arrange it so that you always have a money buffer when an unexpected expense pops up.
“Calculate your average monthly fixed expenses (rent, utilities, groceries, etc.) and multiply that number by a minimum of three,” Brantly said. “Commit to filling a savings account with that amount.”
Use a High-Yield Savings Account
Ensure your cash savings are in a high-yield savings account.
“Current APY rates for those are 4.5% so if you don’t have a HYSA account yet, you’re missing out on some solid passive income,” Brantly said.
Separate Near-Future and Long-Term Goals — and Invest Accordingly
Goal setting and meeting doesn’t end in retirement; if anything, it intensifies. Be assertive in building out near and long-term financial goals.
“List out what you want to accomplish within the next three years,” Brantly said. “Set up separate savings accounts for each near-term goal and automate monthly contributions to them.”
For long-term financial goals (more than three years in the future), it is recommended to compound your wealth.
“Robo-advisors are a great way to start as they determine your risk value and set things up for you,” Brantly said. “DIY is a great approach for more experienced investors too.”
But maybe the best path in this scenario is to work with a financial advisor or retirement planner to make sure you’re doing everything in the most profitable and secure way.
Calculate Your Investing Rate (IR)
Do you know your investing rate (IR)? You should! You can figure it out by “dividing your monthly investment amount by your average monthly income, multiplied by 100,” Brantly said. “The bigger the number the more wealth you will build for retirement and the quicker you will get there.”
Invest In a Taxable and a Tax-Advantaged Account
“Invest in at least one tax-advantaged account, such as an IRA or a 401(k), and one taxable brokerage account,” Brantly said. “There are benefits to both types.”
Diversify Your Portfolio
If you want to be well-protected in retirement, it’s crucial to diversify both ahead of and in your golden years.
“[Consider] stocks, bonds, ETFs, real estate, and business investing,” Brantly said. “Multiple streams of income are important, as each investment type offers a different return on investment.”
Stay Consistent and Be Patient
Above all, stay consistent with your strategy and dedicated to your investment commitments. Practice patience, too.
“Creating passive income takes time and requires patience, especially in volatile markets but it’s the only way to a care-free retirement,” Brantly said. “It is important to avoid panicking when the market drops.”
Plan For Healthcare Costs
Healthcare expenses in retirement can be high, and put major pressure on your finances. Plan ahead for these potentially significant costs. Adopting a healthy lifestyle now can also reduce future healthcare costs.
Stay Financially Informed
Always stay in the know of the latest trends and developments in finance and retirement planning. You can do this “by attending workshops, reading books and following respected financial experts to expand your knowledge base,” Owens said. “Learning should remain part of life’s journey; stay abreast with developments for optimal decisions about financial matters!”
More From GOBankingRates
This article originally appeared on GOBankingRates.com: Almost One-Third of Retirees Still Work for Extra Cash — How Experts Say You Can Avoid It