3 Tips to Achieve Financial Independence Before You Retire
Filed under: Financial Planning
Fireworks, parades, and pool parties. That’s what comes to mind for most people when they think about the Fourth of July. The holiday is a great midpoint in the summer to enjoy a couple days off work and celebrate with friends and family.
Amid the festivities, it’s easy to forget what we’re celebrating. The Fourth marks the signing of the Declaration of Independence in 1776. The signing of that document declared that the 13 American colonies were free, independent states and were no longer subject to British rule.
Retirement is your time to declare your own independence from the constraints of a busy career. You get to take control of your schedule, and spend your time doing what makes you happy. Whether you want to travel, pursue a favorite hobby or simply relax with family, retirement is your time to truly live independently.
Financial independence is a key element in an enjoyable retirement. You’ll need enough assets and income to support your lifestyle for several decades or more. It takes focus, discipline and a long-term strategy. Below are a few tips to help you declare your financial independence.
Saving is always important, but it’s even more so as you approach retirement. The final years of your career represent your last opportunity to contribute to your 401(k), IRA, or other savings vehicles. This is the time to scale back your spending and boost your savings rate.
Use a budget to cut your spending as much as possible. Then allocate savings contributions to both long-term and short-term vehicles. Your 401(k) plan and IRA can be effective long-term accounts because of tax deferral, though you can’t access those funds until age 59½. You also may want to save money in nonqualified accounts, which won’t offer tax deferral, but which you can use to generate income earlier in life.
Nothing can derail your journey to financial independence like risk. There are a variety of risks that could threaten your retirement. One is market risk. Volatility is a natural element in the financial markets. However, you can take steps to minimize your exposure. If you haven’t reviewed your strategy lately, now may be the time to do so. As you get closer to retirement, it may make sense to shift to a more conservative allocation.
Also consider vehicles that reduce your risk exposure. For example, annuities offer features that minimize risk. In a fixed indexed annuity, you receive interest based on the performance of a market index, like the S&P 500. If the index performs well, you may receive more interest, up to a limit. However, if the index performs poorly, your annuity value doesn’t go down. An annuity could be an effective way to get growth potential without downside risk.
Create guaranteed income.
Annuities aren’t just for risk protection. They can also be used to create guaranteed lifetime income. Guaranteed income is important to establishing financial independence. When your retirement income is guaranteed, you can make confident, informed spending decisions. You can also be sure that you won’t outlive your income, no matter how long you live.
Many annuities offer guaranteed withdrawal benefits. With this feature, you’re allowed to withdraw a certain percentage of the contract value each year. As long as you stay within the allowed amount, your withdrawal is guaranteed for life, even if your annuity value goes down.
Ready to chart your path for financial independence in retirement? Let’s talk about it. Contact us today at Ambrose Financial and Insurance Services. We can help you analyze your needs and develop a strategy. Let’s connect soon and start the conversation.
Annuities contain limitations including withdrawal charges, fees, and a market value adjustment which may affect contract values.
Annuities are products of the insurance industry; guarantees are backed by the claims-paying ability of the issuing company. Guaranteed lifetime income available through annuitization or the purchase of an optional lifetime income rider, a benefit for which an annual premium is charged.
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