Kevin Lao, a financial planner and founder of Imagine Financial Security, recommends having six to nine months of expenses in your emergency fund. He suggests keeping this money in a high-yield savings account for immediate accessibility and a decent rate of return. According to the 2024 Spending in Retirement Study by the Employee Benefits Research Institute (EBRI), 68% of retirees with debt in 2024 had credit card debt.
With rates averaging over 21%, this debt could cost thousands of dollars in interest. For example, repaying a $7,000 balance at 21% interest could take over four years and cost nearly $3,600. This money could be better used to secure your retirement rather than jeopardize it.
The EBRI report also found that just 59% of retirees have three months of emergency savings, yet 36% have faced unexpected expenses since retiring. An emergency fund is essential to cover unforeseen events, such as medical expenses or unplanned travel. Without it, retirees may deplete their savings sooner than planned or accrue expensive debt.
There’s no substitute for the guidance of a professional financial planner who can verify that your savings are on track to sustain you throughout retirement.
strategies for a stress-free retirement
These services don’t come cheap.
Certified Financial Planners (CFPs) typically charge an hourly rate or a percentage of the assets they manage for you. Hourly rates average between $120 and $300 per hour, and percentage fees range from 0.50% to 2%, depending on the value of the assets. An annuity is an insurance contract that can provide a stable income during retirement.
You pay a premium as a lump sum or through payments, and the insurance company makes payments to you. These can continue for a set period or your lifetime. Some annuities also provide death benefits.
Annuities are complex and come with various fees, so it is advisable to consult a fee-based financial advisor or tax professional before purchasing one. Investing in professional financial planning, paying off high-interest debt, establishing a robust emergency fund, and considering annuities can significantly contribute to a stress-free retirement. Proper planning and strategic financial choices made today can ensure a comfortable and secure retirement tomorrow.
Image Credits: Photo by James Hose Jr on Unsplash
