Work is an important aspect of every adult’s life. It helps you pay bills, put food on the table, and lead a relatively comfortable life. Unfortunately, it can also be stressful, exhausting, and take its toll on both the mind and body.
That’s one of the reasons why people look forward to retirement after decades of continuous work.
They want to relax, traveland spend their days doing something they love instead of enduring the daily grind. While this is a good plan, it is also difficult to achieve in the modern economy.
Many people struggle to save enough money for their retirement. Unexpected expenses, higher living costs, and several other factors can compromise retirement savings. That’s why many financial experts recommend buying a home early.
This can help you retire faster and still lead a comfortable life. Here are some tips that can help:
Pay Off the Mortgage
You will only be able to enjoy the benefits of owning a home if your mortgage is paid off well before your retirement and don’t have to deal with loans. Make sure your home is free and clear of any liens by the time you enter retirement age.
This can be done with some planning and effort. Experts recommend the steps mentioned below:
-Pay 10% or 20% more on your monthly mortgage installment. If you pay$1,000 every month, increase it by 10% and pay $1,100 dollars. If the payment is consistent, the mortgage will be done in 25 years. Make sure the lender knows the additional payment goes towards the principal amount instead of interest.
-Pay an additional installment eachyear, which will also cut down on the loan period. If you combine both payments, you might be able to cut the term down to 15-20 years.
-Paying more during times of financial certainty can help if you find yourself in a difficult situation. You can wrap up the mortgage quickly.
-Make it a point to set up a biweekly mortgage system, which allows you to pay half of the mortgage installment every two weeks. If your mortgage is $1,000, pay $500 every two weeks. You will end up paying one extra installment every year.
Paying the mortgage off early can also help you save money on interest. For example, by paying off a 30-year mortgage in 20-25 years, you save 5 to 10 years’ worth of interest money.
If you’re in a relatively stable financial situation and have some room in your budget, consider switching to a 15-year mortgage.
Downsize and Move Out of Town
When children are out of the house and you don’t need those additional two or three rooms, it’s a good idea to downsize and move to a more affordable location. This can be especially beneficial if your current home is in a thriving real estate market. For example, a moderately-sized home in LA will sell quickly at a good price.
You will have a comfortable amount to buy a small house in nearby affordable markets.
You can move to places like Oxnard or Ventura, which are just a couple of hours away from LA. This step can help you add several hundred thousand dollars to your retirement fund. These locations also have a more affordable lifestyle so you’ll spend less every day and still maintain your standard of living.
Downsize and Stay in Town
Some people don’t want to leave their city, so moving out of town isn’t an alternative for them.
But even downsizing is a good financial decision. You will still get a few hundred thousand dollars in your account, which gives you some breathing room when it comes to finances.
Smaller houses in more affordable neighborhoods will have lower maintenance costs, property taxes, association fees, etc. The overall reduction in expenses can help you lead a more comfortable life during retirement.
Don’t Carry the Mortgage To Retirement
If you have no intention to move or downsize, don’t carry the mortgage to retirement. People don’t have a steady income flow during this phase of life unless they have made sound investments or work part-timeas a consultantor freelancer. This means your savings don’t get replenished quickly; so adding the burden of a mortgage to such a situation is unwise.
You’ll lead a more comfortable retired life if there are no loans or mortgages holding your financial freedom back.
While buying a property is a big expense with long-term financial impact, the investment is worth it. Even a slow real estate market can change and develop over time. So you can expect to regain some money after decades of living in a home. Property is a secure, reliable investment that can offer a lot of support during retirement.