Once you have stopped working, there’s not much room for financial errors. You need to know what you want and need and have a strategy for getting there. Planning should not be viewed as something that is optional.
Anthony Criscuolo, a certified financial planner with Palisades Hudson Financial Group, says that you should “look at your current and expected sources of income and expenses to determine what your cash-flow will look like during retirement and throughout your life expectancy. As part of this process, you should establish your financial and retirement goals to determine how big of a nest egg you need.”
For example, will you take a $5,000 vacation to Europe each summer or just visit your kids for the holidays? Having yourself a defined target for your nest egg is one of the most important aspects of your retirement plan. Below are eight retirement facts that need to be taken seriously.
Sixty percent of baby boomers today say that they are more worried about running out of money than dying. No one wants to estimate their life expectancy, but it’s important to take this into account for proper planning.
Online calculators can help you to estimate your longevity, but in reality, there are a number of factors to consider – your current age, health, gender, and family history, just to name a few. You can help to mitigate some of the longevity risk to your portfolio with proper planning.
2. A Budget is Not Optional
Maybe over the years you kind of had numbers rolling about in your head about what you were earning and spending. That’s over once you retire. Budget your expenses. Retirees are on a fixed income. It’s very important to write down every expense for the month so you know how much money you’re spending. You might also want to consider working when you reach retirement age. The longer you work, the less likely it is that you will have to dip into your nest egg. Even part-time work for those in their 60s can make a huge difference in how much you’re saving and spending.
While you might think, I’ll start tomorrow, you should be aware that tomorrow might come too late. A recent study has shown that one in three Americans have nothing saved for retirement. Workers either don’t want to reduce their take-home pay or aren’t making it a priority to set money aside for retirement.
This is a very costly mistake. Every dollar that you save in your 20s or 30s in a tax-deferred vehicle is extremely valuable. These dollars grow without taxation, therefore the longer you have to accumulate, the better.
4. Make No Assumptions
Don’t wait until retirement is a decade away before you get serious about saving. What if you get ill or laid off and can’t get another job? Forty-six percent of retirees left the workforce earlier than planned, so it’s important to start saving as early as possible.
If you’re eligible, you should consider saving in a Health Savings Account. An HSA is a great retirement savings tool because you can withdraw money tax-free for qualifying medical expenses. After the age of 65, if you need to take money out for another reason, it will be taxed, but you won’t have to pay the 20% penalty. HSAs don’t have required minimum distributions after age 70, so you can let the money grow in your account until you need it.
6. Understand the Stock Market
It’s a game of averages. Don’t try to outsmart the market. It’s a marathon and not a sprint. You’ll not make money every year, so let the averages play out over time. You should consider dollar-cost averaging. It’s pretty simple. You put money in your investments on a regular and consistent basis. You’ll do much better in the long run than jumping in and out of the market based on daily gyrations.
Many people don’t have a last will and testament, leaving it to state laws to govern their estates. This could, for example, produce disastrous results if it’s a blended family – the current spouse and the children from various marriages could all end up as co-owners of the property.
8. Revisit Your Plan
Creating a financial plan shouldn’t be considered a one-time event. A financial plan is not a map you create once and then follow to the end. As life changes, so too should your financial plans.
Generally, it’s appropriate to revisit your cash-flow projections, asset allocation, and other financial planning documents every two to three years or so.
Source: rd
Images: depositphotos
