Month: August 2018

If you’re thinking of retiring in 2018, here we suggest a few things which you should consider carefully before deciding to close the working chapter of your life for good.

Consider whether your savings are adequate

As our life expectancies continue to lengthen, it is more important than ever to do the math and make sure that you have enough money to support you for many years or even decades into the future. You could do this, for example, by getting an annuity, which acts as a sort-of post-work salary that you receive on a regular basis. You could also use the IRS Required Minimum Distribution (RMD) tables to help you, with these RMD tables specifying the amount of money you have to withdraw from tax-advantaged retirement accounts every year starting at the age of 70 ½. This method is more responsive to market fluctuations than some other methods, making it ideal.

When deciding whether your savings are adequate, be sure to take absolutely all of your expenses into consideration. As well as your bare-bones living costs and bills, be sure to consider things such as healthcare, food, vacations, gifts, and more. You may have to allocate more money for casual spending than you do right now, as many retirees suddenly find themselves spending money more easily in their free time, despite their best intentions to be thrifty. It’s easy to get bored and spend money when you’re retired, so don’t forget this!

Find out whether you are entitled to Social Security

Most US citizens rely on Social Security as a major means of retirement income, although some may use it as an additional source of post-work income. The age at which your retire affects your Social Security benefit amounts, so bear in mind that FRA (full retirement age) varies according to your birth year due to changed policies. If you were born 1943-1954 then it’s 66 and if you were born in 1960 or later then it’s 67.

Retiring before FRA is possible, but your Social Security benefits will be reduced by 5/9 of 1% per month up to 36 months early. It will also be reduced by 5/12 of 1% per month beyond 36 months early. You can claim Social Security benefits as early as 62, but you’ll receive considerably less income than if you retire at FRA or even later, with people retiring at 70 maxing out their monthly checks. The longer you wait to retire, the more you’ll receive in benefits, but this isn’t necessarily the right choice for everyone.

Think about your healthcare costs

Unless you plan on moving to Canada or Europe sometime soon, you’re going to have to think about your healthcare costs as you age. Although Medicare can help you if you’re 65 or older, there is a cornucopia of healthcare costs which Medicare doesn’t cover, such as eye/ear care and nursing home fees. Seniors also face sky-high premiums on insurance policies due to their age, so bear this in mind too. It may be worth looking into Obamacare to help with your healthcare coverage.

Assess your tax situation

You are still taxed when you take money out of your retirement accounts, so be sure to plan for this. The only exceptions are funds coming from a Roth 401(k) or Roth IRA. Recent tax reform passed in 2017 has made changes to tax rates and tax deductions, so it’s important to assess your complete tax liability following your retirement. For example, depending on your income, your Social Security checks may be taxable up to a certain degree, so be aware of what’s going on.

Have a plan

Although you probably want to rest up a bit, retirement shouldn’t be seen as an empty void of time! It’s important to think about how you’re going to keep yourself entertained and socially plugged in, with loneliness and boredom being major problems for a lot of retired people. Retirement may be a good time to join some clubs and take up some new hobbies, keeping your life engaging and interesting!

If you’re thinking about retiring but aren’t sure, speak to a member of our team who can offer you advice on taxes, insurance, income, and much more.

Retirement can seem like it’s lightyears away, but the decades can creep by faster than you might suspect. As a result, it is imperative that you start planning for your retirement sooner rather than later. Here are some retirement-planning mistakes that you need to avoid at all costs!

1. Waiting

According to the American Psychological Association, finances consistently ranks as the #1 stress-inducing factor of US citizens’ lives, and this is something which is unlikely to go away with age. As a result, it is important to plan for our financial futures sooner rather than later. The key is to make decisions now that your future retired self will thank you for. Whether it’s setting up your 401k or meeting with a financial advisor to discuss savings, don’t wait to start planning for your eventual retirement safety net.

2. Being unrealistic

Making a retirement plan is difficult when you’re relatively young, as you have to make lots of assumptions about your financial future and your projected cash-flow for the next few decades. Although it’s easy to assume that you’re going to put away X amount of money every month for 30 years, there will always be unexpected expenses and costs that crop up in your life, whether it’s a new car, new house, or a yearly vacation. It’s also important to take inflation into account and consider making wise investments in order to curb this problem.

3. Forgetting about your quality of life

When talking about your future finances, it’s inevitably important to crunch the numbers and spit out some cold, hard statistics. We might want to maximize our savings over our lives and live as thriftily as possible, but is that the way you really want to live your entire life? Avoiding vacations and treats could save you a lot of money, but you could throw the best years of your life away by living like a pauper and not enjoying yourself. Be sure to allocate some money for fun and enjoyment – life is short and it should still be enjoyed to some degree!

4. Spousal disagreements

Before you start planning for retirement, be sure to talk to your spouse about your future retirement and what you envision for yourself and them too. It’s better to have these conversations early and strive toward mutual goals which you can work toward and both be happy with. If one of you wants to work until the day you die, now is the time to address this issue and ensure that you are both happy many years into the future.

5. Overlooking short-term goals

Of course, retirement is a very important aspect of your financial planning, and it is undoubtedly the one which stretches out the furthest into the future, making it seem rather daunting and omnipresent. Despite the presence of retirement looming over you when you look into your finances, it’s also important to plan for your own short-term financial and personal goals too. Short-term goals obviously depend largely on your lifestyle and future plans, but should be taken into account nonetheless.

For example, if you plan to have children in the near future, you can bet that you’re going to be making numerous shorter-term financial goals which focus on raising your children and putting money away for their college tuition in 18 years’ time. Mortgages and auto expenses are also other important short-term factors, and of course, you need to have a “rainy day fund” for things such as medical issues and crucial home improvements.

Furthermore, as mentioned previously, you need to set some money aside for enjoying yourself and having some fun in your day-to-day life! Just because you want to save up for your retirement fund doesn’t mean you can’t put some money away for that dream vacation you keep thinking about. Even if you retire wealthily, wouldn’t you prefer to look back on your life and know that you enjoyed it?

Saving up for retirement is a long-term plan which likely needs re-assessing from time to time as things change and the economy adapts. If you need help with your retirement fund and making wise decisions, why not give one of our team a call today?