Have you started planning for your retirement? What do you wish your retired life to be like? Take a minute to make a note of what your retirement feels and looks like. Write it out in complete and dazzling detail.
What will your typical day in retirement look like? What will it feel like? What will it smell like? Don’t leave anything out. Be as descriptive as you can and detail…
“A Day In The Life of My Retirement”
Did you describe the life you see when you close your eyes and dream?
I hope so!
You’ve invested your entire life working towards that moment. You have been planning and saving for the last 30-40 years. Right?
Developing a retirement income strategy begins with taking an honest look at what you desire your retirement to be like. Comprehend what is necessary to you … your top priorities … and also the compromises and sacrifices. What price are you going to pay?
Begin penciling out what your retirement will cost. What have you presently allotted for retirement? Do you have enough? If you don’t have enough, how you will bridge the gap?
How much will you save? Where’s the best place to invest it?
Your ultimate goal is to exchange your paycheck income with sustainable, dependable retirement income!
What is Retirement Planning?
According to Investopedia, the process of retirement planning determines retirement income objectives and the actions and decisions necessary to accomplish those goals.
The retirement planning process consists of recognizing sources of income, estimating costs, implementing a savings program, as well as handling your assets and also the associated risks.
How are you planning to put enough money away into savings and investments to accomplish your retirement goals? Exactly how will you plan to turn your savings and investments into income to provide the retired life you’ve always dreamed?
Preparing for your ‘Golden Years’ is a life-long process.
You will certainly continue examining your progress and making adjustments along the way to make sure your reach your retirement goals.
The retirement planning process is not only about being financially ready, but also emotionally prepared. What will it be like not going to work? How will you spend your days? Where will you go? What will you do?
The 3-Legged Stool for Retirement Income
Retirement income normally comes from 3 different resources: retirement savings, pensions as well as social security.
Retirement Savings >> Defined benefit strategies (pension plans), once common in the private sector are few and far between. Most companies only offer the defined payment plans (e.g., 401k). A lot of private firms choose to offer 401k– type strategies due to the fact that they are cheaper and less complex to manage than traditional pension plans.
If you have a 401k– type plan, it’s your responsibility to ensure that you have actually saved enough. And also more notably, you need to absolutely manage the volatility of your retirement accounts. In years past, if you had a pension, all you needed to do was to show up for your job and do your work. When you retired, your pension was waiting for you.
Currently, if you intend to make sure that you have plenty of cash throughout your retirement, you not only have to place the money away for your future, but you also need to manage it as well.
With little to no financial education, this is an extremely difficult problem to solve! Are you up for the job? Have you considered just how you are likely to transform your retirement savings into a predictable cash flow over the course of your entire life?
What happens if the stock market rollercoaster drops dramatically? Especially if you have just ‘enough’. Will you need to go back to work? Decrease your quality of life? Live frugally and worry about all of your money disappearing? Or just ignore it and pretend absolutely nothing happened… and spend freely (till it is far too late)?
If you’re off by even a little bit… it could be catastrophic!
Also, how will taxes effect your retirement income? Uncle Sam is along for the ride with you, isn’t he? If all of your retirement accounts have been funded by pre-tax dollars, then Uncle Sam will certainly want his share when you take distributions from your retirement accounts. If your contributions were post-tax (Roth), your distributions can come out tax-free.
Hopefully, the stock market has helped you achieve your retirement goals. But now, does it still make sense to subject your retirement accounts to the wild ride of the market?
At this point in your life, are you more concerned regarding losing out on a market rally… or being exposed to a market decline?
If your retirement financial savings decline in value due to market volatility, will you have time for the value of your retirement savings to recover?
Pension >> As pointed out earlier, many business have actually switched over from offering pension plans to using retirement accounts (as well as moving the associated risk to their employees). If you are expecting to receive a pension, you will want to keep track of the economic security of your company’s pension. Hopefully, it will be there when you need it.
Also, if you’re married, did you pick the survivor choice? Make the effort to understand your options and also choose what’s best for you as well as your family.
Have you explored the possibility of establishing your own private pension?
Social Security >> Social security was never meant to be your sole source of retirement income (although for many, it might be!) It was supposed to be a safety net.
Are you counting on Social Security to be around when it’s your turn to collect? It makes good sense to plan for the worst as well as hope for the best. What if Social Security is not around (or has significantly lower benefits), how would that affect your retirement?
However, if Social Security is still available to you, would it make sense to understand just how you can optimize your advantages?
One way to maximize your Social Security benefits is by delaying (up to age 70). Nonetheless, like many financial choices, there is not a one size fits all.
There may be reasons to claim your benefits as early as age 62 (because of poor health, need money to survive, or maybe you strongly believe Social Security will not be around for long, and so on).
And there may be arguments that would point to maximize your payout by delaying benefits till age 70 (expected longevity, have other revenues to cover bills, want Social Security to supply larger regular monthly earnings permanently).
The answer might be different if you’re single. And if you’re married, you might have options to optimize their payout based upon both of your benefits.
If you are married, definitely take some time to comprehend the difference in the benefits you’ve earned vs spousal benefits. Does it make sense to claim your spousal benefits early while letting your primary benefits grow … and afterwards switch?
Make inquiries and study your options. What you do not understand WILL potentially cost you thousands (or hundreds of thousands) of dollars over your life time!
It is critical that you do your research and make an informed decision for you as well as your family.
What is Your Full Retirement Age?
Do you understand just how much Social Security you are supposed to get? At what age? Do you know your Full Retirement Age (FRA)?
In 1983, Social Security phased in a gradual increase in the age for collecting full retirement benefits. If you were born between 1954 and 1959, your FRA increased from age 66 to 66 and 10 months. If you were born in 1960 or later, your current FRA for receiving full retirement benefits is age 67.
You can get the answers to many of your questions when you register for your account on the Social Security web site. Go to ssa.gov.
One more great resource regarding retirement as well as Social Security is the Center for Retirement Research Study at Boston College.
A few of the advantages of Social Security:.
- Annual Cost of Living Adjustments (COLA).
- Sustainable and reliable cash flow for your life time.
- Protects against living too long (meaning the benefits will last as long as you do).
- Even if the stock exchange crashes, your monthly benefits never decrease!
- Don’t need to think about.
- Portion of the benefit may be exempt from federal tax. Also, several states do not tax Social Security income.
Make saving for retirement a top priority.
Retirement can be wonderful, but only if you plan for it!
You only get one shot… no do-overs!
May your retirement be glorious!
Enjoy!
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