Periodically Rebalance Your Portfolio
As your retirement investments begin to grow your money, you may find that some portions of your portfolio grow faster than others. To maintain a diversified portfolio, periodically check the ratio of your investments. Its important to monitor the proportions of your investments to ensure that they continue to meet your retirement goals. As you age, the allocation of your assets between risky investments and secure holdings should change. The closer you get to retirement, the more money you will want to move to treasury bonds and other low risk securities. Local retirement advisors can help adjust your diversification and risk tolerance to match your changing needs.
Map Out Your Travel Plans Early
One of the best things about being retired is the ability to travel. Stretch your travel dollars as far as you can by planning ahead! Extended stay hotels are a great option for low-cost housing and making your vacation money last longer. You can also plan lengthier vacations with Airbnb or VRBO, which are often more affordable and flexible than traditional hotels. Whether you want to take an affordable beach vacation or explore the country by RV, be sure to include vacation planning in your retirement checklist!
Some people get a few years into retirement and realize they need more income to support their living costs. Others find that they miss the routine and socialization aspects of the workplace. A part-time job in retirement is an excellent way to keep cash flowing and stay socially active. Substitute teaching, working in retail, assisting with administrative work, and providing child care are all common part-time job options where retirees can find engaging work with flexible schedules.
You’ve Created A Retirement Budget
This may seem like a no-brainer, but many soon-to-be retirees don’t crunch the numbers. Before you ditch your career, it’s important to figure out whether you can live comfortably on your post-retirement income.
Start by adding up your must-have monthly costs, including mortgage or rent, groceries, electricity, and other utilities. Then add in your “wants,” such as travel, entertainment, shopping, and dining out. Once youve calculated your estimated monthly expenses, it’s time to figure out whether you’ll have enough income to cover them. Add up your estimated Social Security benefits, retirement account distributions, pension payments , and any other sources of income you will have. Remember that you will owe income taxes on all distributions except Roth IRAs, Roth 401s, and a portion of Social Security
Once you figure out your retirement budget, now comes the time to estimate how much income you will have to cover those expenses. As mentioned earlier, your sources of income will typically include retirement savings, Social Security, and pension payments, if you’re lucky enough to have one. Another key rule of thumb when determining how much income you will have in retirement: “Your retirement budget, if you retire in your mid-60s, should not exceed 4% of your investments plus Social Security and pension payments,” says Kristi Sullivan, CFP®, of Sullivan Financial Planning LLC in Denver, Colo.
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Handbags You Don’t Use
As with luggage, you might have collected a large handbag collection over time — and you probably only use one or two of them. Handbags can have a high resale value, especially if they are designer brands. Hermes, Chanel and Louis Vuitton tend to retain or even increase in value over time, according to Who What Wear. You might even turn a nice profit by selling a bag with one of these labels.
Consider What You Want Your Life To Look Like In Retirement
So much of retirement focuses on the numbers, but as you near retirement, its also important to consider who youll be in retirement and what sort of lifestyle youd like to enjoy, Poorman says. What activities will bring you joy and purpose as you transition into your next stage of life?
If singlehood tends to be synonymous with flexibility, you may even consider relocating to a more retiree-friendly city, state, or foreign country to stretch your savings.
So much of retirement focuses on the numbers, but as you near retirement, its also important to consider who youll be in retirement and what sort of lifestyle youd like to enjoy.
Stanley Poorman, financial professional
Your Children Are Financially Stable And Independent
At a certain point, you have to stop worrying about your kids and they, hopefully, will start worrying about you. In an ideal world, neither parent nor adult child should have to provide for the other financiallybut life doesnt always unfold as it should. If youre still doling out cash to your kids, you might not want to quit working just yet.
Delay Your Social Security Checks
When planning your retirement income, dont factor in social security payments until age 70. By doing so, your social security benefits will continue to increase until that year. There are many factors that affect the amount of social security youll receive so pay close attention to the rules of the Social Security Administration. Rather than starting payments at age 66 or 67, waiting until age 70 will maximize your payout.
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You Understand The Tax Rules
Finally, you need to know how you’ll be taxed as a retiree so you can see how much income will be left over — and whether relocating may be worth it.
Some states have more favorable tax rules for seniors than others, so research what local taxes and federal taxes you’ll be responsible for. Then make a choice about where you’ll spend your later years and see if you’ll have enough after-tax income to fund your retirement.
See How Work Might Affect Your Social Security Benefits
If you plan on working in retirement, do you know how your earnings may affect your Social Security benefits if you begin benefits before your full retirement age? If you are under age 66, have started benefits, and make too much, you may have some of your Social Security benefits withheld until you reach full retirement age.
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Set Your Retirement Budget
Determining a retirement budget before you retire is crucial to ensuring you dont overspend your limited income. Create a spreadsheet with all of your anticipated retirement living costs, including everything from groceries and housing to healthcare and taxes. Define which of these expenses are fixed and which are flexible . Knowing this information helps ensure you have your income set up so that youre receiving enough money each month to cover your expenses but not taking more income than you need.
Check Life Insurance Policies
Many employers offer life insurance as a part of their benefits package. However, once you retire, you may lose this coverage. Having life insurance in retirement is a good way for your beneficiaries to be able to pay major expenses like a mortgage or funeral costs after your death. While double-checking, renewing, or replacing a life insurance policy doesnt have to be one of your first steps when preparing for retirement, it will make the following years more relaxed and carefree. Take time to review your life insurance policy to make sure any outstanding expenses will be covered in the years after your retirement.
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Timing Isnt Everything But Its Important
The truth is, theres no perfect age to retire because there are so many factors that are unique to your situation.
But whether youve had it circled on the calendar for a decade or youre still not sure, thinking about it is an important step to help building out what your plan will look like.
Whether its 55, 60, 65, 70 or somewhere in between, being prepared can help you get the most out of your retirement.
Consider Your Retirement Budget
As you transition into retirement your income and expenses will change.
Thats why its important to create a new budget for your expenses using your estimated monthly income total in retirement. Some expenses that could go up in retirement are:
Theres also the flipside of this, where some expenses will get easier to manage during retirement. Areas where you may be able to save:
When budgeting, take into account your monthly and yearly budget. How much income do you need to have in a year to have the retirement you want? What are your monthly expenses? Can you cover them each month?
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Tips To Help Prepare For Retirement
Don’t let retirement sneak up on you. Whether you step away from a long career with a single company, hand off the family farm to the next generation, or leave a varied employment history that spans multiple industries, you are going to need an income to live off of when you are no longer working. At BTC Bank, we want to remind you that its never too early to start saving for retirement. If youre wondering how to prepare for retirement, youre not alone. Many Americans dont know how to save for retirement or how much money they need to save for retirement. BTC Bank cares about the future of our community and is here to help you get started planning your retirement. Here are 15 steps to retirement that you can take in Missouri and Iowa.
Your Job Is Affecting Your Health
Did you know that less than half of retirees left the workforce when and as planned? The rest retired earlier or later because of circumstances outside their control, a recent Angus Reid poll found. The truth is none of us can control how we age and theres no shame in changing your plans to ensure the longest, healthiest retirement possibleespecially if youve checked off a number of the above telltale signs.
Envision Your Next Chapter
As retirement planning becomes more complicated, many older workers are failing to make even the most basic preparations. Only about 60% of workers 55 and older have thought about how theyll occupy their time in retirement, according to a 2018 survey by the Employee Benefit Research Institute, and less than half have estimated their retirement expenses.
Picture your day-to-day life in retirement. Perhaps youll work part-time, volunteer, spend time with family and friendsor even continue working full-time with the knowledge that you have the financial independence to take or leave the working world as you please. For many clients, full-time retirement turns out to be a sabbatical, says Michael Kitces, a partner at Pinnacle Advisory Group, in Columbia, Md. Three to six months in, theyre bored and want something to do for the next 29½ years.
Find a retirement mentora current retiree who seems engaged and fulfilled, suggests Catherine Collinson, chief executive officer and president of the Transamerica Center for Retirement Studies. Take that person out for lunch to talk about the retirement-planning process. Also check out online resources such as Encore.org, which can help generate ideas for finding purpose in retirement.
Rodney Smith Is Ready For A Rest
Wherever he went, he wanted to leave a mark.
From Montego Bay, Jamaica to Niagara-on-the-Lake, Rodney Smith has done just that.
On Dec. 23, the 66-year-old will work his final day at Pillitteri Estates Winery. He’ll be retiring, ending a 35-year partnership between him, the winery, and Pillitteris winemaker Jamie Slingerland, who helped Smith immigrate to Canada.
I wanted to make sure. Everywhere I put my feet, whether it be under the sun, on the cement or on a rock, I have to leave a mark, he said.
On the eve of his retirement, Smiths story provides a glimpse into the challenges seasonal farmworkers face in becoming permanent Canadian citizens.
The deck is kind of stacked against seasonal farm workers. To come into the country because of the point system is much more difficult, especially at that time, Slingerland said.
Smiths story is also a prime example of how hard work and taking a chance on someone can pay off.
At 17, Smith left his parents home to go to Montego Bay to find a job.
And after a month I found out I was homeless. So, I was homeless from age 17 to age 20, he said.
An MP was recruiting young men to be seasonal farmworkers in Canada, an opportunity Smith nearly missed. When his mother went to see the person receiving applications, the woman was already moving on to the next town.
Somehow, he ended up being selected. Smith first came to Canada in 1975, working for three months, making $1.90 an hour .
A MAD DASH
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What Will You Do
The worst thing you can do when you retire is nothing at all. Although that might be fun for a week or two, you will eventually get bored. If you continue to do nothing, you run the risk of depression , poor physical health, and decreasing brain function.
Retirement is the ideal time tostart a new hobby, so take the time to think about all the things you want to try but were never able to before due to time or financial constraints. You can keep your brain busy, stay active, and you can enjoy your retirement in the best way, by having fun. Its much better than doing nothing at all.
Read more about finding your next pastime in our article How To Get Started With A New Hobby Today.
Everyone has their own idea of how they want to spend their retirement. Make sure youre ready for retirement by thinking about these things now!
Contribute To 401k Or Ira
The most common way to prepare for retirement is by making regular contributions to a 401k, IRA, or both. If youre employed, find out if your employer offers a retirement savings plan, like a 401k. Automatic payroll deductions automate your savings, and many employers provide matching or partial contributions. Beyond saving for retirement, the money you contribute to a 401k lowers your taxable income today. Read more about the benefits of 401ks.
If your employer doesnt offer a 401k or youre self-employed, contributing to an IRA is another way to save for retirement. Depending on the type of IRA you open, you can enjoy tax benefits now or in retirement. At FirstCapital Bank of Texas, we offer Traditional, Roth, and SEP IRAs, and we can help determine which account is best for your financial situation.
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How To Use The Retirement Calculator
Once you begin, enter your current age and the age you plan to retire. The third question prompts you to pick the country and state or province you live in. This is important because the cost of living varies across regions.
The following questions cover income level, amount of money saved and how much youre going to save per month. The final two questions ask about your investing style and your planned retirement lifestyle.
Stay On Top Of Estate Planning
Estate planning is another key step in a well-rounded retirement plan, and each aspect requires the expertise of different professionals, such as lawyers and accountants, in that specific field. Life insurance is also an important part of an estate plan and the retirement planning process. Having both a proper estate plan and life insurance coverage ensures that your assets are distributed in a manner of your choosing and that your loved ones will not experience financial hardship following your death. A carefully outlined plan also aids in avoiding an expensive and often lengthy probate process.
Tax planning is another crucial part of the estate planning process. If an individual wishes to leave assets to family members or a charity, the tax implications of either gifting or passing them through the estate process must be compared.
A common retirement plan investment approach is based on producing returns that meet yearly inflation-adjusted living expenses while preserving the value of the portfolio. The portfolio is then transferred to the beneficiaries of the deceased. You should consult a tax advisor to determine the correct plan for the individual.
Later on in life, how you would like your money disbursed will be of the utmost importance in terms of cost and taxes, Hebner adds. Working with a fee-only estate planning attorney can assist in preparing and maintaining this aspect of your overall financial plan.
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However, if you have a defined benefit pension you might need to give up pension to take a lump-sum payment. Make sure you check this is the best value option for you.
If youre not sure, you might want to get help and guidance from us or get regulated financial advice.
Keep Adding To Retirement Savings
Are you within a few years of retirement and still trying to maximize your savings? Most financial advice recommends around $1 million in savings for retirement, but dont let that overwhelm you if youre not quite there yet. Even if youre within ten years of retirement, you can still make contributions to your retirement account. In addition to the $5,500 yearly contribution , Traditional and Roth IRAs allow an extra $1,000 catch-up contribution for those over age 50. With 401s, you can contribute both the $18,500 and up to $6,000 in catch-up contributions!
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