Looking Ahead to Retirement? Check Out Our Top 10 Tips For Retirement Planning
1.Snapshot of Your Dream Retirement
This might seem simple, but imagine where you see yourself retired whether it is on the beach, in the mountains, or in the backyard with your grandkids. Now take this mental snapshot and find a real-life picture that brings this mental image to life. Put this image on your fridge, in your wallet, or on your desk at work so every day you are reminded of the end goal and the reward for your decades of hard work. If you have a physical image of your ideal retirement it will not only bring you excitement, but encourage you to save more money for retirement.
Debt is the silent killer and if you do not eliminate debt as soon as possible it can make that dream retirement you pictured in your head feel very far away. However, the quicker you eliminate debt, the easier it will be to save for retirement. The main 5 debts you need to tackle before retirement are mortgage, credit cards, student loans, auto loans, and medical. If you can eliminate these debts before your retirement, you will not have to worry about those annoying monthly loan payments while trying to enjoy your glory days.
3.Automate Your Retirement Savings
We want to make saving for retirement that habit you cannot break. It is important to not just rely on good intentions and your memory to save for retirement. To truly reinforce this habit, you need to make it a routine. Schedule automatic transfers from your checking to a retirement fund for every pay day. This will not only prevent you from spending the money, but also hold you accountable and force you to put money into your retirement savings accounts.
4.Diversify Your Retirement Accounts to Limit the Effect of Taxes
If you put your money into various types of accounts, it will decrease the tax burden when you withdraw from it since different types of accounts are taxed at varying rates. For example, deposits to a 401K offer upfront tax benefits since the money is deducted from your paycheck before taxes. As a result, your taxable income is reduced. Also, since withdrawals from a 401k retirement account is taxed at your income tax rate, you might be able to save money on taxes if you put your savings into a Roth IRA. You are not allowed to deduct deposits from a Roth IRA, but in retirement withdrawals can be tax-free. Investing in these variety of accounts can decrease the tax burden with withdrawals, which means you will have more retirement money.
Do you find yourself still in a 4-bedroom house when you are now only using 2 of the bedrooms? It is time to possibly consider downsizing your house. A smaller house will decrease your property taxes, insurance costs, and maintenance costs. Plus, it will be less square footage for you to take care of. A bonus tip is if you find yourself with left over furniture as you move into your new place, you can donate this furniture and receive a charitable tax deduction.
6.Create a Retirement Budget
According to Bob Lotich writer of “5 Financial Goals for Baby Boomers”, two-thirds of people nearing retirement have not yet created a retirement budget. It is essential to not only create a budget for retirement, but also to create a strategy on how you plan to withdraw your money. It can be beneficial to use a retirement calculator to create a detailed budget and plan your financial future. According to Rob Berger, Forbes Writer, in his article “5 Excellent Retirement Calculators (And All Are Free)” he wrote that the best retirement planning calculators are Personal Capital’s Retirement Planner, Fidelity myPlan Snapshot, Flexible Retirement Planner, The Ultimate Retirement Calculator, and Vanguard Retirement Nest Egg Calculator. If you are looking for a retirement calculator give one of these a try!
7.Find a Good Financial Advisor
Having a reliable financial advisor, will help you for strong fiscal health in retirement. According to Bob Lotich, “Fidelity recently surveyed recent retirees, asking them what they wish they would have done before retirement. When they asked the question, “What advice would you give to a family member or friend who’s within a year of their retirement? The most common answer was to seek guidance from a professional advisor to help with the transition.” A financial advisor will not only help you plan and prepare for retirement, but they can also assist you during retirement. It is hard to manage a large retirement portfolio, and a financial advisor can look at your portfolio as an outside party and develop new strategies to make sure you have a successful retirement.
8.Rein in Extra Expenses
It is important to find room in your budget to save each month for retirement money. This might mean you need to cut back on some household expenses whether it is one less meal dining out or cancelling a subscription you no longer use. Try to cut expenses wherever possible. Do not think about saving for retirement as an obligation where you must deprive yourself, but rather a chance to empower yourself and work towards a life-long goal. You are in control of your retirement future and you choose how much money you want to save.
9.Take Advantage of Catch-Up Contributions
Once you cut those household expenses, you will have more money to take advantage of the IRS provisions. Adults 50 and older can make catch-up contributions to their retirement accounts. These catch-up contributions allow you to make deposits to your IRA accounts and 401(k)s that are above the annual contribution limit. This is great option for baby boomers who might be later to the game for retirement savings.
10.Focus on Your Health
Creating healthy habits will not only help you live longer, but will drastically cut those rising healthcare costs from your budget. It is important to eat healthy, have a solid fitness routine, minimize stress, and maintain a social life. An investment in your health, will allow you to stop spending as much of your retirement savings on health care expenses, and start spending it on that dream vacation.
For more information on retirement planning and tax savings we invite you to call our Lake Mary, Florida financial planning office at 407-478-1599 or fill out our online form.