9 Money Lessons You Need To Know Before You Retire That They Didn’t Teach in School
Financial literacy is sorely under-taught in American schools. This is a terrible shame, as understanding the ins and outs of personal finance is crucial for everyone’s livelihood. We need financial literacy in order to effectively manage our money, get active with investing and to build a comfortable nest egg for retirement.
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“Our world operates on money, yet financial literacy is often overlooked in traditional education,” said Manny Blue, CEO at Blue Legacy Capital. “For many Americans, the lack of financial knowledge poses a significant disadvantage. Personally, the absence of financial literacy led me into a downward spiral where I felt trapped and unable to climb out. Over the past century, our educational system has remained largely unchanged, failing not only our great-grandparents, grandparents and parents but also us and our children.”
If you’re among the masses who didn’t get an adequate education in financial matters, it’s time to catch up. Let’s explore nine money lessons you didn’t learn in school — and need to know before you retire.
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Understanding Debt Management
Most Americans get deep into debt and this is why it’s crucial to understand debt management.
“Learn how to manage and reduce debt effectively, including credit card debt, loans and mortgages,” said Erika Kullberg, a personal finance expert and founder at Erika.com. “Carrying debt into retirement can strain your finances and limit your retirement lifestyle.”
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Emergency Fund Essentials
Millions of Americans are unprepared for the unexpected — according to a recent LendingTree survey, 49% of Americans are unable to cover a $1,000 emergency.
“Unexpected expenses or emergencies can derail retirement plans, but having a financial safety net can help cushion the impact and prevent you from dipping into retirement savings prematurely,” Kullberg said.
Optimizing Retirement Savings
Though the glory days of pension plans are largely behind us, there are still solid ways to get ready for retirement. You probably didn’t learn much in school, if anything, about your options here.
“Take advantage of catch-up contributions to retirement accounts like IRAs and 401(k)s if you’re over 50 to accelerate your savings growth,” Kullberg said.
Healthcare Planning
The cost of healthcare is steep. You need to be informed of your options ahead of retirement.
“Understand the complexities of healthcare costs in retirement, including Medicare coverage, supplemental insurance options and long-term care considerations,” Kullberg said.
Investment Diversification
Everyone should be aggressively investing as early as possible (something else you probably didn’t learn in school), but you need to be savvy in this arena. Don’t put all your investments in one asset. Mix it up.
“Diversifying your investment portfolio helps spread risk and maximize returns,” Kullberg said. “Consider a mix of stocks, bonds, real estate and other assets to build a well-balanced investment portfolio for retirement.”
Tax-Efficient Withdrawal Strategies
“Learn about tax-efficient withdrawal strategies for retirement accounts to minimize tax liabilities and make the most of your retirement income,” Kullberg said. “Strategic planning can help optimize tax savings and preserve retirement assets.”
Social Security Optimization
Planning for your golden years means fully comprehending how Social Security works, including what you’re entitled to and when.
“Understand the ins and outs of Social Security benefits and the optimal claiming strategies based on your unique circumstances,” Kullberg said. “Maximizing Social Security benefits can provide a valuable source of guaranteed income in retirement.”
Estate Planning and Legacy Building
What will happen to your money and other assets when you die? It may feel morbid to address, but it’s really important to have a plan.
“Don’t overlook the importance of estate planning and legacy building,” Kullberg said. “Ensure your assets are distributed according to your wishes and minimize estate taxes. Create or update essential documents such as wills, trusts and powers of attorney.”
Keeping Track of Your Financial Progress
Before you retire (and, really, throughout your adult life), it’s critical to keep track of your financial progress. This entails a few things: maintaining a budget, overhauling said budget on a regular basis and setting goals for your savings.
“Put your savings steps and goals on paper and keep track,” said Dr. Erika Rasure Ph.D., chief financial wellness advisor at Beyond Finance.
And it needn’t be a gloomy journey.
“Being intentional and making the process fun is a great way to visualize the progress you’re making toward retirement,” Rasure said.
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This article originally appeared on GOBankingRates.com: 9 Money Lessons You Need To Know Before You Retire That They Didn’t Teach in School