Retirement Planning Secrets
Do you want to know a secret?
Have you heard those rumors that retirement is almost impossible to achieve? We have a few secrets to share straight from the lips of those who know, because they’re retiring now.
Retirement will come sooner than you think – 65 is the traditional age to retire but many people plan to work past age 65. But the truth is 61 is the average current age of retirement, so it’s closer than you might expect…
… Unless it doesn’t come at all, as many retirees are still working at least part-time. So just because you’re officially retired from a full-time career, you may still be doing some type of work.
Retirement may last longer than you expect. Most people spend about 20 years in retirement, but medical advances mean life expectancies are getting longer.
Seventy five percent of your income isn’t enough. That used to be common wisdom, but if you don’t earn a lot of money then you could need as much as ninety percent of what you earn annually in retirement.
Have you heard Florida isn’t the retirement mecca? Based on everything from healthcare quality and cost of living to taxes and crime, Wyoming is now the best place to live if you’re retired.
Almost three out of four retired Boomers don’t work at all, but those who are working aren’t always doing it for a paycheck. Some want to stay active, keep their minds sharp and have a purpose. Oh, and of those who aren’t working, half sight health reasons as to why they don’t. And speaking of that…
Healthcare should be your biggest concern. The average reoccurring cost for Medicare beneficiaries is almost $2,000 per year and at age 85 or older nursing home costs average more than $24,000; some pay over $66,000. Medicare premiums and deductibles are about $3,000 a year. Nursing homes cost between $24,000 to $60,000 per year. And in fact, a retired couple may need up to $220,000 for healthcare costs over the course of retirement.
And finally, perhaps the biggest secret of all – federal retirement benefits are still relevant. Although people use pensions, IRAs, 401k’s and investments, Social Security is STILL a top income source for retirees. In fact, the average retired worker receives over $1,200 every month!
If you’re behind on retirement savings it may be because of debt. Call us and we’ll see if we can help.
How to make plans for the retirement you want, starting right now.
The biggest problem most people have with planning effectively for retirement is procrastination. Most of us simply don’t start early enough, so we’re behind once we actually start saving. Another challenge is planning for the kind of retirement you want, so you can get your finances in order before you ever hit your golden years.
So how do you get off square one when it comes to retirement planning?
- First, open retirement saving investment accounts and start saving. Don’t wait for you next salary increase or when you achieve total freedom from debt. Otherwise, you’re likely never to start saving.
- At minimum you should have a 401(k) or IRA account. If you have a 401(k) plan through your employer, take advantage now and make sure you familiarize yourself with the company’s 401(k) match policy. If you don’t have that option, then open an IRA. Even if you have limited funds you can open a myRA that is designed to help people just starting their retirement plan who may have limited income.
- Once you’ve start saving, start thinking about what you want to do. Start saving first so you can move forward, but then really plan out exactly what you want to do.
- Do you want to move or keep your home?
- Do you want to travel?
- Will having no job drive you crazy?
- If you plan on working, what do you want to do?
- Tweak your saving strategy and financial plans based on retirement dreams. If you’re planning to travel, you’ll likely need more money to make those retirement dreams come true, so you may need to increase your retirement account contributions. If you plan on staying in your home, see exactly how many years you have left before paying off your mortgage so you can make plans to eliminate the debt so you own your home outright.
- Talk to a financial adviser. People think financial planners are only for rich people, but even if you make a modest income you can benefit from the advice of a financial adviser. Take time to find a planner that fits your lifestyle and needs, then take their advice and run with it.
Are your credit cards holding back your retirement plans?
That may sound crazy, but it’s true. Credit cards are revolving debt, which means the payments increase or decrease depending on how much you owe. So if you’re carrying around a lot of credit card debt, then those bills are eating up income and preventing you from having the funds you really need to save effectively.
Even if you have limited income, saving for retirement is possible if you live on a budget and don’t allow debt to overrun your ability to plan effectively. Take a moment to calculate your credit card debt ratio – that’s the amount of credit card debt you have relative to your income. If you divide your monthly credit card payments by your total monthly income and multiply by 100 that’s your ratio.
You want to have a credit card debt ratio of 10% or less. So if you take home $1,000 per month, then your credit card payments should not exceed $100. If your ratio is higher than 10% then you’re spending more than you should on debt payments and you need credit card debt relief.
By using a relief option like debt consolidation, you can lower your monthly payments and make an effective plan for eliminating all of the revolving debt you owe. With those bills eliminated, you’ll have more money available to save. So if you have a credit card debt ratio higher than 10%, start saving what you can for retirement, then talk to a credit counselor to make a plan for debt elimination. Once your debt is eliminated, then you can increase your retirement savings accordingly.