Retirement Planning

Retirement is a big decision for everyone working in today's economy. When you can retire comfortably is a matter that is different for every individual. Taking the proper steps today can help you plan an easy and comfortable retirement for tomorrow. There are many options to choose from to help make retirement the best years of your life.

1. Deciding When to Retire

You may be years from retiring, or it might be closer than you think. The reasons for retiring can be different for everyone, whether it is for health reasons, job reasons, money reasons, or simply because the time is right. To be prepared for retirement, it is best to start early preparing for this very important step in your life. It is never too late or too early to plan for your retirement.

One important step to deciding when to retire is thinking about how much money you would like to have saved. There are many questions that need to be answered when deciding this. How much money you need will depend on how many bills you will have in retirement, if you will want to travel, if your mortgage is paid off, the cost of living where you will be, inflation, and much more. These questions must be examined and answered when you start thinking about retirement.

Deciding how much money you will need to live the lifestyle you want while retired is important. According to experts, you may need at the very least 70 percent of your pre-retirement income if you plan to live at a comfortable pace. You may need more or less, depending on what activities you plan to partake in.

2. Make Out a Will

A crucial element of retiring may just be the making of a will. It may sound morbid, but in reality it is a practical step in planning and ensuring that all your assets are distributed the way you desire.

What is a will?

A will is simply a legal document that spells out how you want your estate to be divided after your death. It is a simple process, although one that does require much thought and planning. You will establish how any of your assets will be distributed, and who gets what.

What are the requirements of making a will?

In most states, you must be 18 years old to make out a will. You must be of sound judgment and mind. The will must clearly state that it is your will. Most states require that a will be typewritten or computer generated, although there are a few states that accept handwritten wills. You must also sign a will in front of at least two witnesses.
It is not necessary to have a will notarized or done by a lawyer; however, you may want to do so to avoid any discrepancies after your death. You may also wish to have the legal advice of a lawyer when making a will, as they can explain to you the finer points and laws of your state.

3. Employ a Financial Advisor

It is wise to receive the help of a financial advisor to help plan your finances for your retirement. A financial advisor, or planner, is a professional who can give quality investment advice and help plan financial issues with either individuals or businesses. The main job of a financial advisor is to help the person they are working with maximize their net worth by properly distributing their assets. Financial advisors may use stocks, bonds, and insurance products, for example, to meet the goals that the client has set forth.

A financial advisor typically does receive a commission for their services. A newer payment plan is called "fee-based" and is becoming a more popular way to plan in the industry.

When choosing a financial planner to help plan your retirement future, there are many things that should be asked first. Find out how much experience that person has and what their qualifications are. Ask what their approach is to financial planning to make sure you are on the right page when it comes to your future. Find out if the financial planner you would like to choose has had any criminal charges or allegations brought against him or her, and why. Finally, learn about their fee up front, and ask for everything in writing.

4. Social Security: Planning your Benefits

Social Security benefits will be an important part for most people who are retiring. For most Americans, it is the largest source of income when retirement hits. Social Security will replace about 40 percent of whatever your pay check was. It is good to start planning as soon as possible for when you receive your benefits.

You must first qualify as a retired worker by having worked for at least 10 years and have earned 40 Social Security credits. You can do this per year by earning 4 credits in that time frame. Even if you don't have enough credits, you may qualify based on what your spouse earned, even if they are divorced from you, or you have been widowed. The amount that you will get when you retire will be based on three different factors. One is your age at retirement. The second is based on how many years you worked in the workforce. The third is your overall tax contribution into Social Security while you worked. They then base your benefits on the highest rate out of 35 years of working. Spouses who did not work can receive 50% of their spouse's benefits.

It is important to work hard and pay into Social Security, as this can make you a nice cushion of money to rely on when you retire.

5. Receiving your Social Security Benefits

Social Security is a great program that most people in the workforce pay into with taxes. So it's understandable when people close to retiring want to start getting their benefits. But the amount you get also depends on a few factors, such as what year you were born and how old you are.

If you were born before the year 1938, you can receive full retirement at age 65. If you were born after 1959, you can start receiving benefits at age 67. Those born in-between those years can retire between 65 and 67. However, you can start collecting your benefits at age 62, but the amount you collect will be lower. In some cases, the amount lost is not worth the early retirement. Most people wait as long as they can to retire, so they may receive 100% of the benefits that are coming to them.

You will also have the option to continue working after retirement age, and if you choose this, you can receive a benefit credit. This credit will make your monthly payment larger, and this amount can increase the longer you work. This increase continues as long as you are working, and stops when the individual reaches the age of 70. Use your yearly social security statement to determine how much you can receive when you do decide on a retirement date.

6. Appoint a Power of Attorney (POA)

When one is nearing retirement age, it is a good idea to have someone you know and trust help you handle your estate in the event that you cannot do it yourself. This is where a power of attorney can come in. A power of attorney is a legal document that allows someone else to make financial, business, and legal matters on another's behalf. This may be done when one person is sick and unable to make realistic decisions, or simply so there is someone who can help them out if need be.

A power of attorney can help you if you are at retirement age and need assistance. You may give them the power to pick up and cash a check, handle your bank accounts, pay your bills, and more. If you are having trouble in your retirement age, a power of attorney may be an important asset to your plan. Only choose someone that you trust completely, such as a family member, son, or daughter.

There are many degrees of powers of attorney. A general POA may give a designated person the right to make almost any financial or business decision possible. A limited, or special, POA will give rights in some areas but not others. If you believe you may eventually need someone to help you in finance and business matters in your retirement, start planning ahead on appointing a power of attorney.

7. Individual Retirement Accounts

When planning for your retirement, it is best to start an account to have another source of income for when the day comes. Individual Retirement Accounts, or IRA's, as they are better known, can be the first step in having enough money saved to comfortably retire. These are special accounts that have tax advantages that make it simpler to save money for retirement. There are two special types of IRA's available - a Traditional IRA and a Roth IRA.

A traditional IRA will allow the person holding it to save money without actually paying taxes until it is withdrawn. The income that is in the IRA can grow, tax-free, while it is in there. Anyone who earns a taxable income is eligible to open up an IRA. You may have both an IRA and a retirement plan at your place of employment, but it may not be allowed to deduct your IRA contributions on your tax return.

A Roth IRA is not always open to just anyone. There are also differences in what tax advantages you receive with a Roth IRA. The best advantage of this type of account, however, is that your money can be withdrawn without paying federal taxes on it.

Both IRA accounts have different rules and regulations, so it is best to talk to a knowledgeable financial advisor of some sort before you make the decision to start one. However, an IRA can be one of the best decisions you will have made when it comes to retirement age.

8. Your 401K Plan

An important part of retiring comfortably is having a good 401K plan in place. This particular type of plan is a retirement plan that is employer sponsored, not only in the United States but also in other countries. What a 401K does is allows someone who is working and paying taxes to save for their upcoming retirement, while not paying any income taxes on any saved money or earnings until withdrawn.

An employee of a company offering a 401K retirement plan will have a portion of their paycheck deferred into their 401K account. These employees may select from many investment options, such as investing in stocks, bonds, money market investments, and more. Some companies also offer the option of buying into the company's own stock.

A 401K plan is a great option for those planning on a nice retirement nest egg. All assets put into a 401K are tax deferred until withdrawn. Having money taken directly form your paycheck and deposited into a separate account is an easy way to save money for your retirement.

9. Enjoying your Retirement

Planning your retirement can be easy, and it is never too late to start planning ahead. Putting money aside in a savings account is also helpful in planning for your future. Investing in other options, such as land or real estate, are other ways you can help your nest egg come along. There are many ways to plan ahead and save money, and financial advisors can help you on the road to comfort.

To enjoy your retirement years the most, start planning them as soon as possible. Decide on the best time to retire, and have a well-laid plan mapped out ahead of time. That way you will have plenty of money to live comfortably, as well as the ability to travel if desired and enjoy the best things in life. Retirement is the last step in life, and it deserves to be lived well.
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