You’ve got your nest egg, but the reality is things will happen that mean you just really need the money. Besides keeping an eye on your spending – we outlined three big traps people fall into that can erode their retirement nest egg here. What else can you do to keep yourself from dipping into your retirement fund? We spoke to financial advisor, Michael Cave to find out.
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Look after your stuff
Houses need maintenance, so if you don’t want to be hit with a big sum like a bill for a new roof or car repairs, make sure you look after the one you’ve got, so it lasts longer. That means regular upkeep and maintenance.
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Take care of yourself
When you stay on top of your health, you’ll save money in the long run. With regular attention (doctor and dentist visits), health issues can be dealt with when they’re smaller – and less expensive. Meanwhile eat well, take regular gentle exercise, and stay involved in your community. It’s the best recipe for a long and happy retirement – and far fewer medical emergencies. “If you have health insurance as well, you’re covered for some of those unavoidable issues,” advises Michael.
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Downsize (and upgrade) your home
This is something you can do to get ahead in the finances game. If your chicks have flown the nest and you’re still living in the family home, you might want to downsize to a smaller place – newer, cheaper and easier to heat and clean. If your current home is well maintained, you could have a sum left over to tuck away into your savings for retirement or emergencies.
And here’s something you don’t hear often from financial advisors – buy some new things! Replace big items that are worn out – your old car, whiteware or appliances and get the best quality you can afford. “They’ll be more efficient, less expensive to run and unlikely to need repairs – that’s a good investment,” says Michael.
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Let interest build your savings
Once your nest egg is a certain size, you might be tempted to start enjoying life with the interest. This sounds reasonable, but it’s actually a mistake. Michael’s advice: “Unless you’re already retired and living on a pension, you should let the interest keep building your retirement fund.” He says that’s for two reasons:
- Letting interest accrue means you can contribute less out of your current income, and you could put more into an emergency account.
- Inflation makes a fixed sum less valuable over time, while interest helps your nest egg keep up with current values and purchasing power.
Avoid traps for a comfy old age
You can both protect your nest egg and cope with emergencies – you just need to do the maintenance chores, plan ahead and look after yourself. Downsize your dwelling before an emergency forces your hand, and use any extra cash wisely and well – either as savings or for more efficient appliances. Don’t make the mistake of living off the interest, or you’ll have less spending power when you need it. With your nest egg intact, you can look forward to retirement with confidence.