Retirement should be a welcome respite after decades of work. And while most retirees do enjoy their early years, far too many end up with financial or health-related problems that turn retirement from a satisfying time to a struggle.
Furthermore, many retirees also face serious emotional problems: Did you know that seniors are 40% more likely to suffer from clinical depression than non-retirees?
There are things you can do before you retire to make sure your retirement is easier and more satisfying, and that you're better prepared financially, physically, and emotionally. Here are the four that could have the most impact.
Build up a cash safety net
Here's a scary stat: Two out of five American adults couldn't come up with $400 for an emergency. Furthermore, the median American household has less than $5,000 in savings. That might sound like a decent chunk of cash, but it wouldn't cover basic expenses for even a few months for most folks.
And don't consider your retirement savings to be your emergency fund. If you tap your retirement savings early, you'll lose a substantial amount to penalties and taxes -- easily 35% or more of what you cash out, depending on your marginal income tax rate. Furthermore, if your economic hardship, such as a job loss, occurs during a recession or market crash, you could be selling those investments at the absolute worst time: when the market has fallen sharply.
Add it up, and you might end up selling $10,000 worth of assets to net $5,000 in cash. That's a terrible way to raise money for an emergency.
If you steadily build up cash savings that will cover at least six months of expenses, an unexpected financial hardship now will be far less likely to impact your retirement in the future.
Pay off expensive debt
According to a 2017 study, the average U.S. household has almost $25,000 in nonmortgage debt. The average credit card balance was more than $6,000, and the average retail charge account balance was $1,841.
These nonmortgage debts often come with high interest rates, which steadily eat away at your ability to save or even just stay afloat. Paying off high-interest debt -- and keeping it paid off -- is one of the most important things you can do to ensure an easier retirement.
High interest rates absolutely sap your disposable income. The sooner you pay them off, the more quickly you'll benefit from more disposable cash you can use to pump up your retirement savings, build up an emergency fund, or simply save up for (instead of charging) a big splurge.
Think about it this way: Only $5,000 in high-interest debt at 15% interest rate costs you $750 in interest every year. By paying off that debt, you'd free up $750 each year.
Let's say you took that $750 and invested it in a low-cost S&P 500 index fund. Based on the market's historical 10% average annualized returns, that single $750 would be worth more than $5,000 after 20 years.
Practice a little delayed gratification and save up for expensive items instead of charging them and put the money you didn't pay in interest to work creating wealth. That'll definitely help make your retirement a little easier.
Here's how you can finally start getting active
Americans spend a lot of money on the idea of exercising but not much time actually doing it. Only about 18% of Americans who join a gym regularly use it. The biggest reasons why? Likely because it's a bit inconvenient, monotonous, and boring. And it's hard to make yourself do something like that.
Instead of making your workout a boring event you have to go attend (but you won't because it's boring and inconvenient), you can benefit by introducing more walking or other physical activities into your daily routine. Park a 5-minute walk from your office; take the stairs instead of the elevator; get a stand-up desk; get a push-mower.
If you make increased activity part of your routine, you'll be far more likely to actually do it, and the health benefits can be enormous. Furthermore, you're far more likely to continue with these habits even if something interrupts them since they're enmeshed in your daily activities, not some separate thing.
Having made regular physical activity part of your routine will not only pay off with better health in retirement but will increase the likelihood that you'll stay physically active when you retire, too. That will certainly make for a happier and easier retirement.
Make a plan now to avoid something millions of retirees struggle with
As was noted above, retirees are far more likely to fall victim to depression or other mental illness. And while this is a complex topic, it's clear that many retirees struggle with isolation and the loss of purpose when they walk away from work.
Start making a plan for what you'll do with your time now. Include things that give you a sense of purpose like volunteering with favorite charities or local schools, or even continue working part time. Also plan activities that give you regular social interaction, like social clubs or faith-based activities.
The bottom line is, when you retire, many human connections get severed along the way, and oftentimes the sense of purpose you get from your work is also lost. Maintaining your connections with fellow humans and finding something that gives you a sense of purpose in retirement will go a long way toward maintaining your mental health. You can take actions today to help make that a reality when you do retire.