Planning for retirement involves a lot of steps, from planning your income sources to choosing an investment option. If you’re a new retiree, you need to keep in mind that your new income may not be sufficient to sustain your needs. You’ll also need to make sure your assets and debts are balanced.
1. Plan to work in retirement
Working while you are in retirement is a big decision. It’s a decision that can only be made by considering the following: your goals, your current situation, and the cost of your retirement. When you plan to work in retirement, you’ll want to find a way to minimize taxes and still get the most out of your money.
The best way to do this is to start planning early. This way, you can make sure that you have the necessary savings in place with a top company for when you need it. If you’re a retiree, you can make use of retirement plans offered by your employer to get your retirement on track.
Another way to achieve your financial objectives is to hire a financial professional to handle your savings for you. A well-informed financial expert can offer a customized plan designed to meet your specific needs.
You’ll also need to make sure that you’ve got the appropriate insurance coverage for your age. While your employer may offer a retiree health benefit, you might want to consider supplementing this with a separate policy.
There are a number of retirement savings options available to you, from traditional retirement plans to SEP IRAs to a Roth IRA. Each option has its pros and cons, so be sure to research each. For example, a Roth IRA has many smaller annual contribution limits than a traditional IRA.
Depending on your income level and tax bracket, you may be able to take advantage of this savings vehicle. However, you may be charged more in taxes as a result. Other types of retirement savings include annuities, which are insurance policies similar to a pension. These types of products can be more complicated to navigate.
2. Balance Debt, Retirement Income, and Assets
One of the most important questions you should ask yourself when preparing for retirement is how much debt you have and how much money you can safely sock away in a high-interest savings account. Having some extra cash in the bank can keep you from falling prey to those nagging financial planners.
Having some emergency funds in the bank is a big help, especially if you have a long term illness. The last thing you need is a health scare that leaves you strapped for cash. Luckily, many insurance companies offer supplemental Medicare plans, which can cover you if you fall ill while at work. You can also purchase long term care insurance to pay for your retirement.
Ideally, you would like to enter your golden years without debt. In fact, some studies show that carrying more than 10 percent of your total income in debt is an unhealthy habit. Getting your debt under control will not only improve your retirement picture, but will ensure you don’t have to pay the price when the time comes.
While you’re at it, consider selling off some of your lesser utilized assets, such as the car, to pay off the mortgage. After all, no one wants to live in a house of cards. Considering that you’ve likely got more than a few decades to burn, the best strategy is to plan for the future with a bit of foresight.
When deciding on the best way to spend your hard earned savings, be sure to consider not only the future of your industry, but your personal tastes as well. This will allow you to make the right decisions, as well as help ensure you have the resources to tinker with your portfolio in the future.
3. Adjust Income Sources for New Retirees
One of the many challenges that a new retiree will confront is finding out just where to cut the check. The trick is to avoid racking up an arm and a leg on your retirement plan. Luckily, there are a number of resources to turn to for guidance.
For instance, the retirement planning section of the American Society of Certified Public Accountants (ASCPA) offers a free online service that’s as easy to navigate as it is to use. Taking the time to get organized will ensure that you make smart choices for your golden years. With a bit of guidance and a few keystrokes, you can make the retirement of your dreams a reality.
After all, you’ll be spending a lot less time tinkering with your 401(k) and making the occasional mortgage payment. Having a sound financial plan is the best way to prepare for the day you call it a day. Of course, the best route to take is to use an accountant or financial planner to get your affairs
In order, a reputable advisor can help you navigate the maze that is your financial future, savor the good times and ensure that you get the retirement of your dreams. Using a financial planner to handle your taxes and retirement plans may not seem fun, but it can be a relief if you’re having trouble taming your checkbook.
4. Invest in Real Estate
There are a lot of factors to consider when investing in real estate. You have to be willing to take the risk, as well as have the patience to watch the real estate market closely. Real estate is a great way to invest in your retirement. It can provide cash flow, as well as provide a safety net if the stock market is down.
Investing in a rental property will increase your income. In addition, the appreciation on the property may offset inflation. If you have a good property manager, you won’t have to deal with all the maintenance. Buying a rental property isn’t for everyone. Purchasing one requires a large upfront investment. However, if you can make a 20% down payment, it can be a good safety net for your savings.
One of the best ways to invest in real estate is to purchase a Real Estate Investment Trust. These are similar to ETFs for stocks. They invest in commercial and residential properties. The investor gets a pro rata portion of the appreciation on the property.
Another option is to invest in real estate as part of a diversified portfolio. Having several properties makes your portfolio more stable. Your portfolio can be a mix of rental properties, commercial properties, and even vacation rentals. Investing in real estate also can increase your portfolio’s overall yield. However, it is important to understand the risks and taxes that come along with such a purchase.
Before making a decision, you need to calculate the expected income. Add in the cost of the home, including property taxes and maintenance fees. This allows you to calculate the annual profit.
5. Taxes on Your Retirement Savings
There are a number of ways to minimize the taxes on your savings. These include choosing different types of accounts, minimizing withdrawals in your working years, and taking advantage of certain tax credits. However, you can also incur penalties if you don’t use your accounts correctly.
The amount you pay in taxes depends on the type of account you have and your individual situation. For example, a 401(k) will give you a tax break when you make contributions. However, you will pay tax when you take your first withdrawal in retirement. Likewise, a Roth IRA won’t affect your taxable income today, but you will pay tax on any withdrawals in the future.
Choosing the best type of retirement savings account is also important. After-tax accounts can help you reduce taxes in the long run, but they aren’t always the best choice. If you’re in a lower tax bracket now, you may find it cheaper to make contributions to an after-tax account and pay taxes up front.
