Downsizing, investment losses or job losses, a growing modification against your adjustable rate mortgage, and rising prices of a number of items such as gas, car or rice are a few of the factors that could prove detrimental for your financial planning with respect to the golden years.
When your income falls short of covering every expense, you might be tempted to reduce retirement savings in IRA or 401(k) for payment of bills. However, these actions would definitely have some or the other negative side effect. If you refrain from saving, there will be a reduction in the amount of money you will have when you take the decision to retire. In certain situations, you might also need to postpone the retirement.
In order to protect your retirement funds, it is advisable to opt for the following:
Control over Spending
If you want to keep a check on spending, you must first understand the manner in which you spend. Give yourself some time for reviewing the amount spent for the past couple of months, or the previous year. You might also consider investing in money management software in order to scrutinize your expenses regularly.
When you have jotted down the expenses that you incur, look through for areas wherein you can save. For example, you can always bring down the number of visits to expensive restaurants, cut down on auto expenses by sharing during commutation or delay major optional expenses such as a new vehicle or a pricey vacation.
Refinancing the House
If you want to plan a good retirement lifestyle one great way is to sell your current expensive home and move to a less costly one. By taking such a step, you would be able to bring down your present costs and can accumulate a large portion of your income for life after retirement.
Again, you may also go for refinancing your home which is a good option if you want to stay away from compromising on the retirement savings. The rates of interest are comparatively on the lower side. A fixed mortgage with a lower rate may be a great choice, if you are planning to reside in your house for a period of seven years or more than that. However, be careful not to become a victim of tricky offers such as a mortgage which comes free of interest, which has been the cause behind the financial disaster in the lives of a number of homeowners.
Creation of an Emergency Fund
When the economy is bad, probably the biggest thing that might ensure financial stability is a job. In case you have to go for a lesser position or quit your job, you might lose out on your health benefits, income as well as retirement benefits. Render protection to your income by keeping your skills updated, keeping in line with the trends affection the balance sheet of the employer, thereby becoming indispensable at the workplace.
Even if you do not face any personal threat, it is best to immunize the retirement savings against potential incursions through creation of an emergency fund, which can become a backup for at least six months.
