8 Financial Facts To Learn Before You Retire

Retirement isn't so elusive as you continue aging. And while it's nice to think about not having to work, the reality can be less than ideal if you aren't the savviest with money throughout your life. 

Planning for retirement should be a lifelong pursuit. However, the race toward a non-working life ramps up a notch (or ten) in the years beforehand.

So, there are a few financial facts you should learn before you reach your prime retirement years. And we're explaining eight of them in the following sections. 

Top 8 Financial Facts To Learn Before Retirement

1. Early Retirement Isn't All It's Cracked Up To Be

Early retirement might be the dream, but it isn't all it's cracked up to be. In fact, it's just not possible for the average person (regardless of how unfortunate that might be). 

After all, tapping into your nest egg early can be incredibly costly, as you'll pay roughly 10% as a withdrawal penalty from tax-deferred accounts if you take money out before you're 59. 

On top of that, you'll owe income taxes on the amount you withdraw from accounts with pre-tax contributions.

2. Health Care Is Expensive

It's only natural that your medical expenses increase as you age. However, people often underestimate the amount of money they'll need purely for covering health costs in retirement. 

You should get to grips with the Medicare system (the federally funded program offering health coverage for older Americans) before reaching retirement. But just remember, this doesn't start until 65 — another reason why retiring early can be the most expensive thing you decide to do. 

3. Make The Most Of Compounding Interest

Perhaps one of the most important financial facts to learn before retirement is the effectiveness of compound interest. As you might be aware, time is your best friend when saving for your twilight years. 

Over time, your pension savings will increase, thanks to compound interest. So, you should make the most of that and not tap into the fund before you're ready to retire for your remaining years. That way, you'll squeeze every possible drop of interest out of your hard-earned money. 

4. You'll Need A Retirement Budget

Your work life may stop, but budgeting doesn't. You should create a detailed monthly budget that estimates your expenses throughout the initial retirement year. 

Then, make sure you can withdraw the amount you'll need from your pension or other sources of retirement income. Ideally, you should plan to take out enough to meet the minimum distribution requirements and avoid pesky tax-induced penalties. 

That said, don't take out more than you need. Money sitting in a checking account won't do you as much good as leaving it to accrue interest. 

5. You Might Want To Refinance Your Mortgage

If you want to refinance your mortgage, you'll need to do it while you're working. Getting approved will be easier while you're still employed. 

Although you can get approved upon retirement, the process just changes. If you wait until retirement, lenders will calculate your affordability based on an asset depletion or asset drawdown method.

6. Retirement Equals Social Security Benefits

You should figure out when you want to start collecting Social Security benefits if you haven't already. 

Decide whether you'll need the money immediately upon retirement or after a few years. Keep in mind that the government bases your monthly amount on whether you've reached your complete retirement age. 

7. Basic Investment Principles

How you save is important. It's as imperative as how much you save for your twilight years. 

You probably already have savings accounts, but you must learn how they work. Ask questions if you aren't sure and look to diversify your investment portfolio to keep your money as far away from risk as possible (especially if you're approaching complete retirement age). 

8. Emergency Funding Is Available

With all that in mind, the final financial fact is that you aren't alone if you're struggling. Plenty of emergency funding exists, such as an auto title loan from Missouri Title Loans, Inc. 

You can borrow up to $15,000, depending on the value of your vehicle, without having a good credit score. As long as you have a justifiable reason for borrowing, it's an option. 

Get An Auto Title Loan Today!

There are many more financial facts to understand before you retire. But the eight we've discussed above are undoubtedly the most important. From saving money to learning basic investments to compound interest to the prevalence of emergency funding, you're a pro!

But if you ever find yourself in a sticky monetary situation, remember that an auto title loan is an option. Just fill in our online request form, and we'll be in touch to guide you through the process. You don't have to struggle with financial woes alone.

Note: The content provided in this article is only for informational purposes, and you should contact your financial advisor about your specific financial situation.