Income for Life Retirement SeriesWe all strive to retire and not just be financially secure but live in the lifestyle we have become accustomed to. In this Retirement Planning education series, we tackle many major aspects offering "financially simple" tips that will help in your quest... from investing, to insurance, to health care, to social security.
To begin the series, CLICK HERE.
- Downsizing, especially after the children are on their own, is a frequently used approach for managing your income for life. Reducing housing expenses can save tons of money. If you reside in a highly appreciated area where your home could be worth a lot of money, selling can free up a substantial amount of cash flow or even be used to wipe out debt. What is left over can then be added to your nest egg or even used to cover future long-term-care expenses. Keep in mind, if you are married you can protect up to $500k of your profit from capital gains taxes when you sell your home. If you single, it is half of that amount.
- We all know that healthcare costs are outrageous, no matter what your age it. However, the average couple can expect to spend close to $300,000 on out-of-pocket medical expenses, such as such as deductibles and Medicare premiums, during retirement. Sadly that is not factoring long-term care costs into the equation. When coupled with that, medical expenses can be a major budget buster, and you can see why planning for health care expenses is essential or better yet critical to maintaining an income for life.
- As we continue strategizing ways to ensure you have income for life, the next plan of action, may or may not apply to you—manage your pension fund payments. With these types of old style retirement accounts becoming akin to the rotary phone, if you do actually partake in one, consider yourself lucky. The choices you make concerning how you take your money could considerably affect the income you receive from it.
- The majority of us purchase life insurance policies to provide financial security for those we love after we are gone. However, buying a permanent life insurance plan could offer another valuable source of income for life heading into retirement.
- If you hope to maximize the benefits from all your hard-earned retirement savings, you need to protect as much as you can from Uncle Sam. Fortunately, there are plenty of legal ways to do just that. It will take laying some groundwork and understanding exactly what the government looks for in order to reduce taxes on retirement accounts.
- At this point, we are at the halfway mark of our Income for Life series. The seventh strategy to help guarantee your money’s longevity is an annuity. When it comes to discussing annuities understanding what they are and how they work is critical. Annuities are complex vehicles for investing, so be sure you understand what you’re doing before you do it. Now having said that, let’s dive into what are annuities and how they can enhance your retirement income.
- Last time we discussed delaying your Social Security Benefits to help you as you work toward maintaining an income for life and one of the ways to do that is to earn extra income until you reach age 70. While you may still be ready to hang up your hat on your career well before then, that doesn’t mean you can’t prolong taking those benefits by taking on a side job.
- Our fifth article in our “Income for Life” series deals with Social Security, specifically seeing how delaying Social Security benefits will benefit you. While you may not think of it as an inflation beater since it is primarily determined by the amount you pay into the system, the good thing about Social Security is it comes with an automatic cost-of-living adjustment (COLA). For 2017 the COLA was 0.3%; however, it went up to 2.0% in early 2018.
- Retirement will look different for every person. How you plan is vital to your success. Whether you use the bucket strategy or just try managing your spending habits, one of the most important tactics is staying ahead of inflation. Don’t let inflation erode your purchasing power. In order to keep that from happening, you may need to enhance your retirement paycheck with other sources of income. That’s the purpose of this fourth income for life strategy—pulling income from your investments.
- As we dig further into the income for life strategies, remember that even the best-laid plans can go awry. However, if you’ve taken any steps you doing better than half of the country when it comes to your retirement. Nevertheless, there is one area you may have forgotten to account for—inflation. So if you’re hoping to have a nest egg outlast you then this is one caveat that should not be ignored—investing to beat inflation!
- Last week I gave you the first strategy to securing income for life, comprised of three buckets to stretch your dollars as far as they will go. The next action to take in your retirement game plan is to manage your spending. If you’re looking to make sure your nest egg last for decades, you need a plan. Sustaining your income through retirement typically calls for a 4% withdrawal in your first year. After that, adjust it based on inflation. Map out a strategy with your planner that will take into account your monthly budget coupled with your life expectancy. For example, let’s say you have $2 million in your retirement accounts. That means you can withdrawal $80,000 for that first year. Then if inflation is running at 3%, you would take out $82,400 to cover the second year’s expenses.
- Have you ever heard this saying: “Today is what it is because yesterday is what it was, so tomorrow will be what we make of today”? That statement sums up retirement in the truest sense. Whether it is 30 years away or five, retirement is coming. And how you prepare today, by the allocation of money, makes all the difference tomorrow.