the key to financial freedom


When you imagine retirement, you might imagine a time when there are no jobs and cash flow is high. But where is that money coming from? How can you ensure financial freedom in the Golden Age?

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To ensure you have adequate cash flow when you retire, there are some important steps you need to take before you settle in. Here’s how you can stop worrying too when you stop working .

Ask yourself how you want to live after retirement

What determines your financial freedom after retirement depends on your goals. There is no magic number that works for all retirees. It depends on what you want to do with your life after quitting your job.

SoFi financial planner Kendall Meade says the first step in understanding your retirement cash flow is to ask yourself what the best-case scenario will look like. “Financial freedom is the ability to live the life you want. For some, it might mean being able to fully retire and earn money to travel,” Mead said.

pay off high interest debt

One of the big obstacles to cash flow in retirement is if you’re still paying off your debt. Mead suggests prioritizing paying off high-interest debt before retirement. That way, you can use the money that comes in at retirement to support your life instead of supporting debt.

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Save 15% of annual gross income for retirement

The exact amount you’ll need for retirement depends on your goals, but Meade says saving 15% of your income each year is a good rule of thumb, with one caveat. “This assumes you start working young and retire at your normal retirement age. Those who started late or want to retire early may need to save more.” , in the United States, start working at about 17 and retire at 64.

Get a rough idea of ​​how much money you need each year

Is your retirement cash flow aligned with what you plan to spend your money on based on your goals? This is an important decision to make. Unbiased CCO Nihal Pekbeken says a good first step in understanding this is to calculate net worth, the value of assets minus liabilities. “Your assets are all of your retirement income, including Social Security, retirement accounts, and other investments. Your expenses can be anything from living expenses and bills to more exciting things like vacations and hobbies It has been suggested that the average American will spend $60,000 a year in retirement, a figure that may seem a little high or low depending on the individual’s retirement goals. is a good starting point for evaluating where you stand.”

How will you know you are living financially free when you retire? , means you can live as you please without having to find a part-time job to supplement your income,” Peckbeken said.

Work with your financial planner

If you’re feeling really confused about how you’re going to live the life you want after retirement, talk to an expert. “Work with your financial planner to develop a comprehensive financial plan. This includes looking at your specific financial situation and goals to determine if you’re on track,” she says. says Meade.

You should consult a financial advisor who has access to modeling tools, says Doug Ornstein, CFA and senior integrated solutions manager at TIAA Wealth Management. They help you hit your budget and show how much you need to save to reach your goals. Ornstein also indicates that financial advisors should help create a diversified income plan. “The diversified income plan addresses the four main risks he faces in retirement: longevity risk, market risk, inflation risk and cognitive risk.” In this way, all bases are covered. .

However, Ornstein said it’s an ongoing process and that you should check in with your financial advisor regularly to truly enjoy your retirement. Ask your advisor if you’re still on track and aren’t at risk of missing out. No. That’s the key to understanding this stage of life.”

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This article originally appeared on Cash Flow in Retirement: The Key to Financial Freedom

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