pixel-by-pixelWe all want to be financially secure during our retirement years.However, taking action may appear to be impossible.
When you’re trying to keep up with skyrocketing health-care costs, skyrocketing college tuition, skyrocketing mortgage payments, taxes, and an endless stream of bills, building a sizable retirement nest egg seems like a nice goal rather than a must-do now goal.
Regrettably, the clock is ticking.And unless you’re confident that a future windfall or inheritance will save you from a retirement savings shortfall, it’s up to you to make sure your golden years are secure.That’s why it’s critical to link the financial aspects of retirement to your vision of how you want to spend your golden years.
If this is too difficult for you to handle on your own, a qualified fee-only fiduciary adviser can assist you.Meanwhile, here are five important considerations to make as you plan for retirement.
Make a wish list for your retirement.
It’s never too early to start thinking about how you want to live in retirement, as this will help you figure out how much money you’ll need.You should think about it.
- When you’ll retire The longer you work, the more money you’ll be able to save for retirement through your 401(k) plan and individual retirement accounts (IRAs).
- Where you’ll live If you decide to relocate, you’ll need to figure out how much it will cost to live there in terms of housing, food, and transportation.
- If you plan to travel extensively, eat out frequently, or partake in expensive hobbies, you will require more funds than if you plan to live more simply.
Determine where the funds are coming from.
The amount of money you have coming in will determine how much you can spend each year.You should have several sources of retirement income depending on your work history.
- SSI (Social Security) is aYou can begin collecting Social Security at the age of 62, but your monthly benefits will be significantly lower than if you wait until you reach full retirement age (FRA), which is 67 for those born after 1960.If you wait until you are 70 years old, you will be eligible for the highest monthly benefits, which may be significantly higher than your FRA benefits.You can estimate your own benefits using the Social Security Administration’s Quick Calculator.
- IRAs and retirement plansAt the age of 59, you can begin making penalty-free withdrawals from pension plans, 401(k) plans, and traditional IRAs.However, it is preferable to keep these assets invested for as long as possible, then withdraw no more than the annual required minimum distributions (RMDs) that you must begin taking when you reach the age of 72.Also keep in mind that these withdrawals are taxed, so the more you take out, the higher your tax bill may be.You can estimate your RMDs using a variety of online calculators, including this one.You never have to take money out of a Roth IRA or Roth 401(k), and if you do, the withdrawals are tax-free if you are over the age of 59 and have had the account for at least five years.
- Other sources of income Don’t forget about additional income from taxable bank and investment accounts, as well as rental income.You might even consider taking on a part-time job to supplement your income.
Don’t overlook the importance of health care.
The longer you live, the more likely it is that health-care expenses will eat up a large portion of your retirement savings.That is why it is critical to prepare for them.
By the age of 65, you should have enrolled in Medicare as your primary health-care insurer.If you miss the enrollment deadline, you’ll face steep late-enrollment fees, some of which could last the rest of your life.
Don’t forget about long-term care, especially if your family has a history of dementia or chronic illness.A year in a nursing home or assisted living facility can cost more than $100,000.
Save more and invest wisely
If your calculations show that your retirement savings will not be sufficient to fund the retirement you desire, take action while you still have time.
- Increase your pre-tax contributions to your 401(k) plan as much as you can, even if it means cutting other expenses.You’ll reduce your taxable income, and you’ll get even more out of your employer’s matching contributions (if they’re available).
- Contribute to your IRAs on an annual basis if possible.
- If you have at least ten years until you retire, invest at least 60% of your retirement funds in stocks or stock funds.While stock prices are more volatile than bond prices in the short term, they have historically outperformed bonds in the long run.
Hire a reputable expert to help you figure it all out.
If all of these ideas seem overwhelming, don’t take on the task by yourself.From estimating future retirement income and expenses to recommending changes to your retirement savings strategy and managing your investments, an experienced financial planner can help you with all of these issues.
Working with a fee-only fiduciary adviser for a savings goal as important as your retirement is a must.While many financial professionals claim to be fiduciaries, only fee-only advisers can be relied on to act solely in your best interests, which is the fiduciary standard’s foundation.That’s because you pay them directly.Unlike other financial advisors, they do not receive commissions or sales bonuses for trading stocks, selling mutual funds, or selling insurance, so they can devote their full attention to you.
If you need assistance finding a qualified fee-only fiduciary adviser in your area, Wealthramp can help.
Pam Krueger is the founder and CEO of Wealthramp, a partner site that helps people find the best financial advisers.
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