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5 Ways to Prepare Your Finances for Retirement

By U.S. News & World Report

The basic foundation of retirement planning is building up a retirement savings portfolio that is large enough to enable you to enjoy a comfortable lifestyle for the rest of your life. Faithfully funding and intelligently investing in a 401(k) plan, individual retirement account or similar type of retirement savings vehicle is an essential component of your retirement plan.

However, as important as it is to save, it’s just the start. There are other strategies you should be working on that will help you get ready for retirement and build your retirement portfolio. Consider these changes that will improve your retirement prospects:

Start cutting your living expenses down to size. This strategy is important on two fronts. First, by cutting your living expenses now, you will be able to save more money for retirement. And second, you will be conditioning yourself to live on less money so funding life in retirement will get easier.

Gradually cut back on unnecessary expenses and eliminate services that you hardly use. For example, you could find less expensive ways to buy groceries, review your insurance policies to see where you can cut your premiums and improve the energy efficiency of your home to lower your utility costs.

Perhaps most importantly, find less expensive ways to entertain yourself. Entertainment is an easily changeable expense. Since you’re having fun while you’re doing it, money can disappear quickly and easily. Reducing entertainment costs will continue to pay off in retirement. Since you’ll have more leisure time, you’ll need to find more ways to entertain yourself on the cheap.

Get off the debt merry-go-round for good. This may be the single most effective way to cut your living expenses. If you’re currently making monthly payments on credit cards, student loans or car loans, you can reduce your living expenses by hundreds of dollars per month just by paying off debts. The more that you can pay off, the less income you will need in retirement.

Living a debt-free life continues to be a good strategy when you reach retirement. One of the critical disciplines necessary in retirement is staying out of debt. If you can adopt that habit now, there will be less of an adjustment when you retire.

Cut your house payment in half or less. Your monthly house payment is likely to be your single biggest expense. As you are looking to reduce your cost of living in preparation for retirement, there is no way you will be able to do that effectively without substantially reducing your largest expense.

If you plan to stay in your current home, make certain that your mortgage is paid off by the time you retire. Alternately, consider relocating to an area that has lower priced housing. If you have 50 percent equity in your current home by the time you retire and you can move to an area where houses cost half as much, you should be able to purchase one without borrowing for a mortgage.

Be ready for health care sticker shock. Don’t assume that your health care costs will be roughly the same in retirement as they are during your working years. There’s a very good chance that they’ll be higher, and maybe much higher. There are several considerations regarding health care in retirement:

— If you currently have health insurance through your employer, you’re probably paying only a fraction of the monthly premium. Once you retire, the employer subsidy will be gone.

— If you retire before you turn 65, when you will be eligible for Medicare, you will have to obtain coverage through your state’s health insurance exchange. That coverage could be expensive when you’re in your late 50s or early 60s.

— When you do finally qualify for Medicare, you’ll have to pay a premium to participate. The Medicare monthly premium will be $121.80 for new beneficiaries in 2016, and those who earn more than $85,000 per year pay even higher premiums.

— If you are on Medicare, you will almost certainly need to obtain a Medicare supplemental policy, which is often referred to as Medigap coverage. The premium for that coverage can add several hundred dollars per month to your Medicare premium.

Do some careful investigating of your health insurance options, and get a reasonable approximation of what your monthly costs will be once you retire. This is not an area where you should allow yourself to be taken by surprise.

Emergencies won’t stop when you retire. Be prepared. While you’re building your retirement savings plan, you will also need to prepare for emergencies. It’s possible that you will need a larger emergency fund in retirement than you do while working. In large part this is because health care costs will be a major variable, and you have to be ready for uncovered expenses.

You should also be ready to make major repairs on your home and car. You may need to help your adult children who are going through a difficult time. Make a reasonable estimate of how large your emergency fund should be to cover these essential costs, and factor funding it into your regular retirement budget. For example, you could make monthly payments into a fund to cover the replacement of your car. This will enable you to purchase a car without going into debt when the time comes.

Implementing these strategies will enable you to save more money for retirement. You will also be better prepared for the new life that retirement will bring.

Jeff Rose is a certified financial planner, U.S. combat veteran and the founder of GoodFinancialCents.com.

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5 Ways to Prepare Your Finances for Retirement originally appeared on usnews.com

Don’t Settle for Student Loans to Pay for Online Education

By WTOP Staff
Online college programs are becoming a more popular choice for prospective students, with one study finding that more than 6 million students enrolled in at least one online course in fall 2015. The popularity of these courses can be attributed in part to their flexibility with working adults' schedules, students' ability to progress more quickly through online programs and, oftentimes, cheaper tuition. [See 10 low-cost online bachelor's programs for out-of-state students.]Online degrees can be beneficial to many college students, but some studies have shown online learners complete their programs at lower rates than students at traditional brick-and-mortar campuses. Individuals with student loans but no degree comprise two-thirds of defaulted borrowers. Though these numbers are not encouraging, just like for traditional programs, there are ways to reduce how much you'll need to borrow for an online program to ensure you won't become one of these statistics. Don't just settle on borrowing student loans to cover the whole cost of your program and living expenses. Instead, start thinking about how to cut costs and cover your balance in different ways, such as the following. -- Grants and scholarships: Even though you are taking an online course, you can still apply and receive grants and scholarships. But your first step should be to complete the Free Application for Federal Student Aid, commonly referred to as the FAFSA, which will allow you to receive a Pell Grant if your expected family contribution is low enough. The EFC criteria and award amounts are adjusted annually, but the 2017-2018 academic year awards range from $606 to $5,920, which could significantly lower the amount you borrow annually. Your next step is to apply for scholarships. You can start by checking online scholarship search engines, such as the Salt Scholarship Search, College Board's BigFuture and Peterson's. But don't forget to take advantage of local organizations and your school's financial aid office. Both may offer scholarships that you can't find with a national scholarship search. [Review these 10 sites to kick off your scholarship search.]For instance, organizations like the Elks Club, Knights of Columbus or the Rotary Club typically offer scholarships annually to local students. Just because you're going to school online doesn't mean you're ineligible. Visit your local library for scholarship listings, and ask around town. You might be surprised how many local organizations offer scholarships. While these scholarships typically aren't large, every little bit counts. Each dollar you receive in a scholarship is a dollar you don't have to borrow and pay interest on. -- Work-study: Another option for online students may be work-study awards. Not all students enrolled in online programs are eligible, but students at some schools -- including, for example, SUNY Empire State College and Liberty University -- are. Work-study awards are not given upfront like scholarships and grants. In most cases, they are an offer to earn up to the awarded amount if you secure an eligible work-study job. While there is a misconception that all work-study jobs must be on campus, students can work for off-campus, nonprofit or public employers as long as the work is in the public's interest. You may be able to work for a for-profit employer if the job is relevant to your course of study. No matter who the outside employer is, it will need to have an established agreement with your college for you to receive work-study funds. Remember, to be eligible for federal financial aid, you must be enrolled and pursuing a degree or certificate. If you're not working toward a credential, Pell Grants and work-study won't be option, but you may still be able to take advantage of private scholarships -- just be sure to read the eligibility criteria carefully. [Explore what to know about financial aid in online programs.]-- Pay as you go: One of the great benefits to enrolling online is the flexible schedule, which can allow you to complete your college coursework around your responsibilities. But prospective students often overlook using their part- or full-time job earnings as an option for paying for college. Almost 80 percent of college students in 2015 worked at least part time while attending classes, according to the National Center for Education Statistics. By budgeting and thinking strategically about your college costs, you can likely reduce your dependence on student loans by paying a portion out of pocket. Many -- but not all -- online programs are less expensive than traditional programs and often have shorter payment periods. Six, eight or 10 weeks are common course durations. Because of the frequency of payments in an online setting, you may be well-placed to pay as you go and possibly avoid borrowing altogether. Attending college online and avoiding student loans may be challenging, but if you are willing to put in the effort, you can limit the amount you need to borrow. More from U.S. News Q&A: Understanding Student Loan Discharge Eligibility Student Loan Refinancing Isn't Right for All Borrowers
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