What Is Retirement Planning
Retirement planning is the process of figuring out how much money youll need to save for retirement and then putting a plan in place to get there.
Here are a few questions to ask yourself as you start planning for your retirement:
- What do I want to do in retirement?
- When do I want to retire?
- How much money will I need to save by the time I retire?
- How much will I need to invest every month to hit my retirement goals?
- Which retirement accounts should I use?
- What should I be investing in within my retirement accounts?
- What about medical expenses and long-term care in retirement?
Why is a retirement plan so important? Because it gives you a clear path to success. It inspires you to take action. So take some time to sit down with your spouse, maybe meet with a qualified investment professional, and start answering these questions. Remember: The sooner you start planning for retirement, the faster youll be able to make progress.
Best Time To Plan For Retirement Age 70 65 60 55 50 45
Owen Winkelmolen
Fee-for-service financial planner and founder of PlanEasy.ca
There is never a bad time to start saving for retirement, but when is the BEST time to start planning? Weve been told to start saving & investing for retirement from a very young age, the earlier the better, but when do you actually start planning for retirement itself? When do you start to think about income, expenses, taxes and government benefits during your retirement years?
Retirement can be very complex. When you reach retirement its pretty easy to have 6-10 different income sources, all with different tax treatments and claw back rules. One income source can be tax free while the other is fully taxed. Some retirement income is counted when calculating government benefit claw backs while others arent. These rules can make it difficult to estimate how much you can expect in retirement.
Retirees usually have their own source of retirement income from TFSAs, RRSPs, LIRAs, RRIFs, and non-registered accounts. Plus, they have government retirement programs like CPP, OAS and GIS. Then there are government benefits like the GST/HST credit and other seniors benefits. And on top of that there are defined benefit pensions and annuities too.
With all these different income sources, it can get a little confusing. It can be difficult to know exactly how much can you expect in retirement income, how much will be lost to taxes, and how that matches up with retirement expenses.
What Constitutes A ‘moderate Lifestyle’
The comfortable standard of living is the highest echelon, according to the PLSA, but a “moderate” lifestyle would still be enough for a holiday in Europe for two weeks a year and eating out a few times a month.
This would require an income of £20,800 a year for a single person or an additional £11,000 in personal pension money once the state pension age is reached.
According to Brewin Dolphin, a saver would need £410,429 in their pension by age 55 to be able to afford this standard of living without running out of money before 91.
A 50-year-old earning £40,000 would need to have already saved £300,000 and start contributing 20pc into their pension each year. They would also need a £25,000 Isa.
Ms Morris said: For those with larger pension pots, retiring earlier can of course be possible, but you should bear in mind that for someone to retire at 55, they would need a £150,000 pension pot at 40 and making 12pc pension contributions to ensure they didnt run out of money until 91, while drawing an annual retirement income of £20,800.
A phased retirement could offer a good compromise, she added, and working part time can reduce some of the pressure on pensions, which would only need to top up a lower income level rather than immediately replace all earnings.
Reader Service: Do you know what makes a good pension pot? Learn how to find your old pensions to boost your savings.
This guide is kept updated with the latest advice.
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Consider Working Longer If Youre Able To
In the past, it was very common to retire and take Social Security at 62. But for every year you wait after 62, you have a roughly 8% return per year on your Social Security lifetime benefit. So if you wait from 62 to 70, the amount that Social Security pays climbs dramatically.
Working longer will also allow you to stash away more cash for your imminent retirement.
Want Health In Retirement Make Exercise Fun
Try making exercise something you look forward to instead of something you have to do. Instead of walking on a treadmill, take walks through the park or go for mini hikes. Still does not appeal to you? Why not listen to music or, better yet, bring a friend along and talk and laugh as you get the heart rate going.
Best of all, there is a bonus to the fun! Research from Cornell Food and Brand Lab found that those who think they are having fun while exercising end up eating less than those who are doing it for exercise.
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Consider Your Personal Disability Quotient
Nobody wants their retirement plan fouled up by the inability to work in the latter years of their career!
Visit WhatsMyPDQ.org to assess your personal disability quotient . This a free service of the Council of Disability Insurance. Your PDQ will predict the likelihood of you needing to use disability insurance during your working lifetime.
Once you have that info, you can make an informed decision about buying a short-term disability insurance plan.
Your Social Security Benefits
When should you take Social Security? This is an important decision that will affect your retirement income for years to come.
A financial professional can help explore your claiming strategies, and you can also check out your Social Security benefits information at ssa.gov. Take the time to evaluate when youd like to start receiving benefits.
$1,413.37 is the average monthly Social Security benefit for retirees2
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Be Realistic About What Retirement Will Mean To Your Lifestyle
While many things are fairly universal for retirees, such as having lots of time to do what you want, some things might surprise you. Boredom can be a big problem, especially for someone who is used to a busy pre-retirement life. Time isnt necessarily fun when its spent in front of the TV wishing you had something to do.
If you want to know how to be happy after retirement? Explore 120 things to do in retirement.
Isnt Your Financial Advisor Helping You With This
This is exactly what a fiduciary financial planner is forto figure this out with you . If youre paying somebody who only manages your money or sells you products, it may be time for a change. Reach out if youd like to talktheres no obligation, and we can just chat. I do not sell anything for a commission, I provide ongoing or one-time advice for clients, and I can work with people in Colorado and other states.
If you dont yet work with a financial advisor, consider the benefits of doing so. You can spend your time and energy on other things, and an experienced professional can help guide you through lifes inevitable changes. Plus, a study from Schwab Modern Wealth showed that having a plan can increase your retirement confidence and help you develop healthy financial behaviors:
- 56% of people with a written financial plan felt very confident about their goals
- Only 17% of respondents without a plan felt very confident
There are many ways to work with an advisor, and things may have changed since you last spoke to a financial planner. For example, its easier than ever to work with somebody for one-time financial planning or pay a flat fee for advice. Its understandable if youve had bad experiences in the past, and there are still plenty of advisors out there who are painful to work with, but things are changing.
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A Word About Social Security
Dave tells folks saving for retirement to pretend that Social Security doesnt exist. If its still available when you retiregreat! If not, you wont miss it. But for Mr. and Mrs. C. as well as millions of folks in their position, Social Security will play a big role in their monthly income. If they can delay taking Social Security until theyre 70, theyll maximize their monthly payments. For example, a 62-year-old retiring this year could receive a maximum monthly benefit of $1,992, but a 70-year-old retiring this year could receive $3,425 a month.
Determine Your Retirement Readiness
If your employer’s policy is to offer retirement at age 65, think about whether you are really ready to quit from a psychological and a financial perspective. If not, consider whether you want to ask your employer to allow you to work a few more years, or if you’d like to be hired as a consultant.
Ideally, you will do this at least a year before you reach 65, as some employers start the retirement process early. Many employers now focus on hiring and retaining employees who are experienced and “know the business” to strengthen their intellectual banks.
Staying on as a salaried employee not only means you continue to receive a steady income, but you will also continue to receive health coverage and other benefits your employer offers. On the other hand, going the consultant route offers you more flexibility and could allow you to have more of a working retirement.
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Lower Your Living Expenses Wherever Possible
For many people, simply getting out of debt is the single best way to lower your living expenses. But if youve already paid off all your debt, and your cost of living is still too high for the retirement income you expect, youll have to take a close look at other areas of your budget.
Weve already discussed trading down to a less expensive home. That strategy alone can be sufficient to reduce your cost of living to an acceptable level. Even if your home is paid for, if its large or expensive, it will still come with high carrying costs. A high-priced home comes with high real estate taxes, property insurance, utilities, and repairs and maintenance costs. Trading down to a smaller home, or one located in a less expensive area, could cut your housing expense substantially.
And though it isnt a frequent topic of retirement planning discussions, you might also take a close look at your car. If you can pay off any loan on it, that will be the single biggest step to lowering your carrying cost. But even apart from paying it off, you may also want to consider downsizing.
The more expensive the vehicle is, the more youll pay for insurance, repairs and maintenance, and registration fees and ad valorem taxes. By buying a less expensive car, youll reduce those expenses.
Now, lets tackle what could very well be your biggest single expense in retirement.
Evaluate A Phased Retirement
You might be ready to step away from working 40 hours or more each week, but not to completely give up work. Phasing into retirement, by gradually giving up some roles and responsibilities, helps provide a sense of what life without that everyday mission looks like, says Chet Schwartz, a financial representative with Strategies for Wealth in New York City. A gradual retirement could bring emotional benefits like social engagement with co-workers and a sense of purpose. A phased retirement also brings in some income, and may be a chance to let your current retirement accounts grow for several more years before making withdrawals. Even a few years of this approach can add up to a meaningful swing in the longevity of someones nest egg, Schwartz says.
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When Should I Collect Social Security
You can start collecting Social Security benefits as soon as you turn 62, but for many, it might be worth it to wait until full retirement age, which is 67 for those born in 1960 or later. If you decide to tap into Social Security before your full retirement age, your benefit could be permanently reduced by as much as 30%. If you can wait until age 70, you will receive 100% of your benefit plus an additional 32%.
Another way to increase your Social Security checks is by adding more high-earning years to your work record. Social Security is calculated based on the 35 years of your career where you earned the most money. If you work more than 35 years, you can drop your lowest earning years and receive a bigger benefit in the future.
Its important to talk through claiming strategies with your financial adviser when you turn 60. Having a plan for your benefits and claiming at the right time typically means more money in your monthly check.
Factor In Health Care Costs
At age 65, you will be eligible for Medicare. If you currently have health care coverage through your employer and retire before age 65, youll want to research health insurance options you can use until you turn 65. One of the biggest costs in retirement is health care, Pellegrino says. You will need to have a game plan for generating income from your investments to solve any potential health insurance gaps.
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Adjust To Turning Your Perspective Upside Down
Retirement is a big deal. Both your lifestyle and your finances do an almost 180 when you retire. Your time is suddenly spent in leisure not work and you go from earning money to spending. It can be challenging to go from a focus on accumulation to spending .
Explore 6 tips to flip your mindset from saving to efficient spending. Or, if you are worried about retirement, try changing your perspective!
Think About The Big Picture
It is easy to worry about getting older. Health faltering and all Did your golf game not go as planned this afternoon? Has your knee faltered for a second time? No doubt. Its a bummer. Aging is a
However, instead of focusing on your own shortcomings, be sure that you are doing and experiencing things that make an impact. Bring joy to other people. Be inspiring. Do something memorable.
Sure, retirement is your time. Just keep the big picture in mind and be sure to leave behind a little inspiration.
Speaking of inspiration Share this article with your friends! And, let us know what you think makes for a happy retirement in the comments below!
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How To Prepare For Retirement By 60
The sooner you begin the process, the easier it will be.
Preparing for retirement can be challenging because the amount of money you need to leave the workforce depends on your ability to save and the kind of life you want to live when you’re retired.
That said, Fidelity Investments developed a rule of thumb to help people plan. It recommends having eight times your income socked away by age 60. Having that much cash in savings will make it possible to be able to retire by age 67, according to the brokerage firm.
How Can I Save Money By Switching To Wealthsimple Invest
We charge a fraction of the fees that traditional mutual fund investors pay. Our management fee is 0.5% , plus underlying fund fees of about 0.1%. The average mutual fund investor pays 2% in fees.
Our smart technology helps keep your portfolio on track with auto-deposits, automatic rebalancing, and dividend reinvesting. And, we have a team of experienced financial advisors available to answer your questions and provide advice – whenever you need it.
Note: the total savings above, calculates the what you’d save if you were investing with Wealthsimple Invest compared to a traditional mutual fund investor. We compare the growth of your current savings between now and your retirement based on the rate of return selected. All figures are for illustrative purposes only, actual results will vary and fees among other factors are subject to change.
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Single Here Are Tips For You
Whether by circumstances or choice, the U.S. Census Bureau estimates that there were 19.5 million unmarried U.S. residents age 65 and older in 2016. Experts estimate that around 23 percent of the older population nationwide will age alone and that percentage can be much higher as high as 50% in many cities. These aging adults are often referred to as elder orphans or solo seniors.
Women especially are living alone in greater numbers. The Administration on Aging and the Administration for Community Living found that 54% of women in the U.S. over 65 are divorced, single, or widowed.
There are some challenges to retiring alone. Here are a few tips for navigating retirement on your own.
Try This If You Arent Sure If It Is Time To Retire
Some of us cant wait to retire and do so as early as possible. Others are not so sure about life without work. Reluctant retirees might be worried about money or they might be concerned that they will just really miss work. The fear of missing out can be strong for both work and leisure.
If you want a happy retirement, you need to leave the workforce at the right time for you.
Here are 9 exercises to help you decide if it is time to call it quits.
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