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How to Prepare an Emergency Fund When Retiring
By Matt Schmidt
Retirement is a time to look forward to – finally being free from the daily grind, spending time with loved ones, and exploring new hobbies and interests. But it’s important to remember that things don’t always go as planned. That’s why it’s crucial to have an emergency fund in place before you retire. In this blog post, we will discuss how to prepare for retirement while still having an adequate emergency fund in case of unexpected expenses.
In addition to making sure you have adequate money set aside for emergencies, you’ll also wish to make sure that your final expenses are addressed via a pre-paid funeral or by obtaining a burial insurance policy. As a consumer, you’d have lots of choices of well known insurance providers such as Mutual of Omaha, Lincoln Heritage, Senior Life Insurance Company and Gerber Life Insurance Company.
An emergency fund is money that can be used in unexpected or unpredictable circumstances, like an illness, job loss, or a sudden repair for your home. It’s not meant to cover daily expenses; instead, it should provide you with extra protection from financial hardship if something happens. Ideally, you’d wish to set up some type of ‘liquid’ account such as a savings account where the funds could be accessed in a timely manner.
Experts recommend having between three and six months of necessary expenses in an emergency fund. For some family’s you might benefit from having twelve to eighteen months saved up. This amount should be adjusted depending on your income level, current financial situation, age, and health status. It’s also important to consider the cost of living in your area.
We’ll also recommend that ideally you should have a burial insurance policy in force, to address the costs that come along with the death of a family member. While this isn’t a pleasant conversation to have with your family, it’s an important one. A burial insurance policy provides many benefits such as guaranteeing that the costs of funerals are covered.
Emergency fund written on a piggy bank.
When preparing for retirement, it can be difficult to come up with enough funds for an emergency fund quickly. But don’t worry – there are plenty of ways to build up this safety net without sacrificing other priorities.
Here are some sources from which you can gather the funds you need for a nice cushion in case of a crisis:
Another option is to take out a home equity loan or line of credit, which can be used for emergency expenses down the road. You can borrow money with SSL and repay it over an extended period of time.
It’s important to remember that building an emergency fund is a process, not something you can do overnight. Take your time and be mindful of the decisions you make so that you don’t put yourself in a financial bind while readying for retirement. It’s a marathon, and not a sprint!!!
How much money do you need each month to pay for necessary expenses such as rent, utilities, food, transportation, and medicine? As mentioned earlier, aim for an emergency fund that can provide for your necessities for at least 3 months.
And then calculate how much money you are likely to need. Add up the costs of any major expenses you might encounter, such as car repairs, replacing a damaged roof, medical bills or a death in the family. Everyone’s ‘figure’s will vary, so only YOU can determine an adequate amount of savings.
This should include your retirement savings but also any additional funds that could be used to start an emergency fund. Look for ways to ‘trim’ expenses such as unsubscribing from services you’re no longer using. Maybe something along the lines of a magazine subscription, or a Netflix type of service.
Take your target amount and give yourself a deadline for when it needs to be accomplished and figure out how to get there. Set a schedule for when you are to add to your fund and how much. Also please be sure to set a realistic timeframe for completing your financial objectives.
You have several options when it comes to saving the money for an emergency fund. You can store the money in a savings account, a Roth IRA, or even a certificate of deposit (CD). Set up automated transfers from your regular bank account into your emergency fund account. Just make sure that you can easily access it for, well, emergencies.
Money market funds and high interest savings accounts are two of the safest and most liquid options available. With a money market fund, your money is invested in short-term debt securities such as Treasury bills, commercial paper, and certificates of deposit. This allows you to access your money quickly if needed, and the fund typically has a low risk of losing value.
A high-interest savings account is another good option for an emergency fund. These accounts offer competitive interest rates, and you can easily access your money whenever you need it. Plus, most banks offer free online banking and mobile apps that make it easy to your account on the go.
Your circumstances may change over time so make sure you are monitoring your emergency fund regularly, and adjusting as necessary, keeping your eye on the prize – peace of mind and financial security for you and your loved ones. Life changes over time, so it’s important to update your emergency savings account accordingly.
Having an emergency fund in place before you retire is key to a successful retirement. Start planning ahead and saving now, so you’ll be prepared no matter what life throws at you! While doing so, please also make sure that you have the proper insurance plans obtained to address your burial expenses. In the event you’re unfamiliar with how to obtain the best funeral insurance, please contact us.
At the end of the day, having a secure financial future is all about being prepared. Take the time to do your research and talk to a financial planner if you need help. Good luck!