Well we don’t want to worry you but even Moses himself had to wait until retirement to achieve prominence. JR just kept working and even Luke Skywalker gets older! Retirement can mean many things in the modern world and it should be very positive, but for everyday folk just how do you plan ahead to ensure you have enough cash in later years?
The Biggest Fear?
You’ve already worked it out we guess? Outliving retirement savings after you’ve stopped working. It’s the worst possible outcome, and it doesn’t do any harm to scare yourself once a day the experts reckon. But seriously, you really can avoid this so read on.
So What Do I Need to Do First?
The best thing to do is sit down with your favourite tipple and try and plan ahead realistically as that endearing term, ‘budget’ comes to mind. But delete those mental images of flash cars, boats and Moses parting the sea! Of course we hope you win the lottery, but looking at your monthly outgoings alongside the long term income you receive will be a much better bet at this stage. You may have a company pension or social security lined up, so make sure your targets are real.
What About Tax When I’m Older?
We’d knew you’d ask that question, and of course it’s extremely sensible to take a closer look at this as you walk the line. But even Johnny Cash would have worked out his taxable income.
Let’s say you have both taxable and IRA accounts? It would be best to take out a regular source of income from these accounts. Taking out no more than $1,000 each month won’t really mean you pay substantial tax.
This also means your accounts will have room to grow further – you may even later be able to take out a lump sum to pay off the mortgage. It keeps you at a manageable level tax wise which is very important.
So We Must Look at Debt as Well Then?
The dream would be to take care of all debt before you retire of course. Even taking out a car payment of the mortgage can make a huge difference in later years. If you aren’t luck enough to quite get there, then financing can actually help this in retirement. But do what you can to limit the debt you have and this makes things much easier for you in the long run.
Is it Safe to Mention Long-term Care Insurance?
It’s safe and sensible to take a look at this, because if you have no insurance cover any savings could quickly be wiped out. The truth is premiums are high and these costs are going up annually. Hopefully you won’t even have to think about this in retirement but check out our feature on the subject and do more research. It won’t do any harm.
Ok What Do We Do Regarding Assets and Investments?
If you have all your savings in investments with a guaranteed return like treasury securities for example then it’s possible your income could run out at some point. Purchasing an annuity with the rider of a guaranteed income paying you a sum each and every month until death would be a very good move. It may not win you the super bowl, but it can pay dividends long term.
You may even consider Longevity insurance if you think the family will all live long. There could the possibility of you selecting a mix of equities like mutual funds or blue chip stocks. Corporate bonds are a good option along with ETFs and preferred stocks. If you can prevent dipping into your investments a little further into retirement then this will certainly give you a solid foundation. Employ the services of a good financial adviser if you must!
There are many other things you can do to boost your income in retirement and you should look at as many options as possible. Retirement is a fresh beginning for everyone – so plan well and reap the benefits!