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Retirement Planning
A Simple Guide

An Introduction

Retirement planning for seniors doesn’t have to be complicated. In fact, it can be exhilarating when you have the right support, the latest information and the best resources. 

Just think about it: You get to make your retirement all about you. It’s your turn. It’s your time to reap the rewards of those many years of hard work. You get to do it your way, and it’s never too early to start planning the retirement of your dreams. 

With the right support—the kind provided by The Senior Life—you can move through estate planning for seniors with ease. What is estate planning? Everything from your will, to your power of attorney, advance directive, living will, health insurance, life insurance and so much more. It’s everything you’ll need for peace of mind and a carefree retirement. 

We also want to make sure that no senior pays more than necessary in taxes during retirement. You have worked hard to save and invest, and the last thing you’ll want to endure is heavy Social Security taxation during retirement. That’s why we’ve compiled valuable tax strategies for retirement—to save you money and eliminate worry. 

We have found that many retirees (and future retirees) would benefit from having a financial advisor, but they simply don’t know what questions to ask. We have collected the top questions to ask your financial advisor about retirement, to make sure nothing is missed and that you can breathe easy before and after you retire. 

The Senior Life wants to guide you through the process of retirement planning for seniors. Let’s make your retirement the best time of your life!

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Ways to Boost Your Retirement

It’s all about financial security and independence. We are talking about retirement, and it’s never too early to start planning for it.

According to the dictionary published by Merriam-Webster, retirement is defined as “To withdraw from one’s position or occupation or from active working life.” Sounds like a formal way of saying, “The time has come to leave work behind for the best times of my life.”

At one point in American history, retirement did not exist for a vast majority of workers. That all changed in 1935 when one of the components of The New Deal included a government-managed retirement plan called Social Security. Combine that with much longer lifespans, and retirement turned in the longest and most beautiful chapter of many Americans’ lives.

The United States Census Bureau conducted a survey that included the following interesting statistics:

  • The average retirement age for Americans is 62 years old.
  • More than 20 percent of the American population will be older than 65 by the year 2050.
  • The average length of retirement for Americans is 18 years.
  • Around 50 percent of retirees leave the workforce before they are ready to retire.
  • 41 percent of retirees have to leave the workforce because of a disability or health problems.

The most eye-opening statistic is the one stating the average length of retirement for Americans is 18 years. How do you finance such a lengthy retirement period? With almost half of all Americans not having saved a dime for retirement, let’s look at an empowering financial blueprint called Retirement For Dummies, with financial retirement advice specific to where you’re at in your career. 

Ways to Save for Retirement 

Knowing how much to save for retirement isn’t easy. In most cases, the earlier you save for retirement, the less money you’ll have to put aside from each paycheck. For example, a worker in her 20s should put away 10 percent of her income, while a worker in his 40s should sock away around 50 percent of his income.

However, it’s never too late to start saving for retirement! This guide shares time-tested retirement planning and financial management tips for seniors.

401 k

With many companies offering 401(k) retirement savings plans, you might have the opportunity to save for retirement automatically by having a certain amount deducted from your paycheck each week. Many brokerages offer retirement accounts that allow customers to stash away as little $25 per week in retirement savings.

Despite the retirement programs available for workers, you still have to reimagine your life after a career in the American workforce by projecting your retirement financing needs. 

Here are a few factors that determine saving strategies for retirees:

  • The average retirement age for Americans is 62 years old.
  • More than 20 percent of the American population will be older than 65 by the year 2050.
  • The average length of retirement for Americans is 18 years.
  • Around 50 percent of retirees leave the workforce before they are ready to retire.
  • 41 percent of retirees have to leave the workforce because of a disability or health problems.

When you calculate retirement income, assume the average annual rate of inflation is four percent, and make sure to adjust your projections accordingly. Inflation can take a huge bite out of a retirement nest egg, which makes starting early and contributing often a must.

The other keys to saving for retirement include the following financial tips:

  • Diversify investment holdings.
  • Allocate assets to lower your risk.
  • Establish an automatic deduction plan  your paycheck to a bank account.
  • Make the maximum contributions allowed by law to your employer-sponsored retirement plan.
  • Reduce your personal debt.

IRA Retirement Account

The IRA account is one of the most important choices for retirement, and involves setting up an Individual Retirement Account (IRA). Fidelity defines an IRA Retirement Account as, “An IRA is an account set up at a financial institution that allows an individual to save for retirement with tax-free growth or on a tax-deferred basis.” It further explains, “An individual retirement account (IRA) allows you to save money for retirement in a tax-advantaged way.” 

There are 3 types of IRA accounts: Traditional IRA, Roth IRA, and a Rollover IRA. With each account you will contribute money, then you can deduct that amount on your tax return. Your earnings can be tax-deferred until you withdraw them in retirement, which could put you in a lower tax bracket than you were in during pre-retirement. Under federal law, you have to wait until you reach 59 1/2 years of age to tap into a traditional IRA for funds. The same federal law applies to an employer-sponsored 401k plan. Although you can withdraw money from an IRA at age 59 1/2, you should consider leaving as much money in the retirement account as possible, to keep your funds growing. The IRS requires IRA account holders to start withdrawing a minimum amount of money at the age of 70 1/2. This means you’ll have 11 additional years to commit to  focusing on saving money for retirement.

Can I Retire Early?

Here’s What You Should Consider Before You Retire Early

It’s a common question: How can I retire early? In 2018, more than half of all American retirees retired sooner than they’d planned. That means they retired with fewer benefits than they’d hoped. 

And as years progress, the full-benefit retirement age continues to rise—meaning that the desire to retire early is becoming more real than ever.

As you start to think about at what age you can retire, there are some tactics worth exploring, especially if you’d like to retire early without taking a financial hit. 

How to Retire Early

Early retirement means different things to different people. For you, it might mean never again having to go to work. Or, it might mean not living paycheck-to-paycheck, leaving your full-time job, or earning a little money here-and-there just to stay engaged. Maybe you want to start a business, make your own hours, or just get more creative about how you spend your days.

No matter how you define retirement for yourself, there are things you can do to move your retirement age forward. Here’s what a financial advisor might suggest you start doing now:

Spend less than you earn

Also known as ‘living below your means,’ this concept must come with the understanding that you can’t put off saving for retirement. Avoid loans whenever possible, keep a ledger that results in a positive number…and invest the difference in your retirement. You’re never too young to start.  

Work with your financial planner to reduce unnecessary spending now, so you can invest more in your future.

Eliminate debt

Pay off or refinance your mortgage. Carry zero credit card balances. Avoid interest and lower interest rates whenever possible. 

Remember, the money you’re paying in interest could be earning interest for you in a retirement savings plan, so you can retire early.

Increase your income

It’s always a good idea to have multiple streams of income. No one knows what tomorrow will bring, and losing your only source of revenue could cripple your retirement plans.

Opportunities for side hustles abound, like Instacart, Uber, Grubhub…all of which can be done in your spare time, without having to commit to a schedule. 

You can also generate cash flow in the form of passive income.

Passive income is an outstanding strategy for early retirement, not only because it boosts your cash flow diversity, but because it requires minimal time investment once it’s rolling.

Some examples of passive income include…

  • real estate
  • high-yield investments like dividend stocks and CDs
  • app development
  • lending platforms (a.k.a. P2P or Peer-to-Peer lending)
  • land, garage, storage space or parking space rental
  • Airbnb (room or second home rental)
  • car rental
  • affiliate marketing
  • product royalties
  • publish a book
  • create and sell an online training course
  • eCommerce
  • business outsourcing
  • vending machines
  • angel investment

Maximize your savings

Early, aggressive investment is imperative to accumulating sufficient funds for forty years’ worth of retirement savings. And along with that aggressive plan must come volume. More cash invested now means more dividends to cover that long retirement stretch.

If you’re employer is matching funds, then contribute the maximum, remembering that $19K may be contributed pre-tax to a 401K, and up to $6K in IRA contributions are tax-deductible. 

If you have money left over after you max out your 401K, then consult with your financial advisor for the best plan for making the most of those extra savings, with stock, annuity or index fund investments. 

Save a little extra, outside your retirement plan

If you anticipate withdrawing money from your 401K before the age of 59.5, you will pay penalties. If you want to retire at age 55, for example, be sure to reserve funds you can access without fees (including a Roth IRA) to cover your first 4.5 years of retirement.

Plan for health and dental insurance

Medicare does not take effect until the age of 65. So if you retire early, how will your healthcare needs be covered? If your spouse will not retire early, perhaps their plan will cover you. Apart from that, you’ll need to research Cobra options, The Affordable Care Act, dental insurance for seniors, faith-based plans like Medi-Share and other free-market insurance plans.

Opening an HSA (Health Savings Account) now can be of great benefit, to help cover costs between early retirement and Medicare coverage. Contributions through your employer are pre-tax, and medical expenses are paid tax-free. Many employers match contributions, and when the HSA is maxed out, you can choose to invest the excess (with tax-free gains). That’s a triple tax advantage that enhances healthcare coverage and boosts your retirement savings.

Finding the Balance to Retire Early

If early retirement is your goal, it’s important to gauge just how important it is. 

Are you willing to tighten your budget and make sacrifices now? Would you rather distribute your earnings throughout your life? Or reward yourself after the hard work is finished?

This is an entirely personal decision, and every retirement vision is different. No matter at what age you expect to retire, you will have earned it, and you’ll deserve the retirement of your dreams. At The Senior Life, we are committed to helping you achieve that. 

Pre-Retirement Checklist

Here's What to Do Before Your Retire

Retirement planning for seniors doesn’t have to be complicated. In fact, it can be exhilarating when you have the right support, the latest information and the best resources. 

 

Just think about it: You get to make your retirement all about you. It’s your turn. It’s your time to reap the rewards of those many years of hard work. You get to do it your way, and it’s never too early to start planning the retirement of your dreams. 

With the right support—the kind provided by The Senior Life—you can move through estate planning for seniors with ease. What is estate planning? Everything from your will, to your power of attorney, advance directive, living will, health insurance, life insurance and so much more. It’s everything you’ll need for peace of mind and a carefree retirement. 

We also want to make sure that no senior pays more than necessary in taxes during retirement. You have worked hard to save and invest, and the last thing you’ll want to endure is heavy Social Security taxation during retirement. That’s why we’ve compiled valuable tax strategies for retirement—to save you money and eliminate worry. 

We have found that many retirees (and future retirees) would benefit from having a financial advisor, but they simply don’t know what questions to ask. We have collected the top questions to ask your financial advisor about retirement, to make sure nothing is missed and that you can breathe easy before and after you retire. 

The Senior Life wants to guide you through the process of retirement planning for seniors. Let’s make your retirement the best time of your life!

Retirement Questions to Ask your Financial Advisor

No matter what your age, there’s going to be uncertainty about the future. No one knows what lies ahead, and that’s why it’s so important to prepare yourself with top questions to ask your financial advisor about retirement.

Will your retirement plan be there for you if you’re gifted with bonus years? 

Too often, retirees are caught having not planned well in one area or another. That’s understandable. You only retire once. You only get one shot at doing this right. And that’s why having professional financial advice for retirement planning is so important. You can’t be expected to know what questions to ask, what bases to cover…but you do have the right and the responsibility to gather as much financial wisdom as you can, so you can enjoy the type of retirement you deserve.

According to a recent Ameritrade survey, about half of middle-aged Americans have already withdrawn funds from their retirement savings plans, with the majority of them neglecting to make catch-up contributions. That same group does not plan to rely on Social Security for their retirement income.

So what gives?

Will your retirement plan support you?

That’s just one of many questions you should have ready for your retirement planning financial advisor.

Make a List: Top Questions to Ask your Financial Advisor about Retirement

From the very first time you speak with your retirement advisor, you can start to gather the information you’ll need for living the retirement of your dreams. Ask no questions—or ask the wrong questions—and you could be in for a rude awakening after it’s too late.

Will I have enough money to retire the way I want to?

This question is far more effective than the more common, “Will I have enough money to retire?”

No two retirement visions are identical, so asking a financial retirement advisor if you’ll have enough income, without having long-term goals for how you wish to live in retirement, will not serve you.

So ask your retirement specialist this question, but only after listing…

  • where you plan to live, and what fees will be involved
  • how much you plan to spend on food and utilities
  • how much you’ll travel
  • what activities you’ll engage in, and how often
  • what vehicle you’ll drive
  • what level of gift-giving you’d like to maintain
  • whom will live with you, and their retirement income
  • how much money you’d like to leave to your children

Can I support myself if I live to be 100?

Life expectancy for the average American is around 80 years. However, to plan for anything less than 100 years would be silly. 

Remember that any average is made from extremes on both ends, meaning that for as many people who pass away tragically at a young age, there are just as many who live far past what’s expected.

Will your retirement plan be there for you if you’re gifted with bonus years? 

How much extra money will I have to play with during retirement?

You know what you plan to do in retirement, and you know how much that will cost. But what if you take up golf? What if you and your spouse meet another fun-loving couple and the four of you decide to sail around the world? 

Will you have the wiggle room to make that happen? Or will you be tied to a budget designed by your younger, less-adventurous self?

Will I have to work during retirement?

Maybe you like to stay busy, and you have plans on taking a part-time job after you retire. 

What if a health challenge develops? Or what if you take up a hobby that becomes more important than working? 

These are all expected shifts that occur during retirement, and good reasons to ask your financial advisor retirement specialist what kind of impact not working will have on your lifestyle. 

Is the retirement plan I designed 20 years ago still relevant?

You’ve heard that risky investments are better when you’re in your 30s. And then, when you’re within a decade of retirement, those investments should be changed to preserve the funds you’ve accumulated.

But there’s more.

How has your family situation changed? How about your health? Did shifts in income affect how much money was contributed? Do you have more heirs, or fewer heirs, than you did then? Has your retirement vision shifted?

Life is filled with change, and your retirement plan should embody that.

Am I on-track to retire when I wish?

When working with a financial advisor, this is a much better question than, “When can I retire?”

Too often, people decide at what age they can retire based upon their retirement plan prospects. 

A better strategy would be to decide at what age you wish to retire, and then talk to your retirement advisor to develop a financial plan for making that happen.

How will my multiple streams of income work for me during retirement?

Most people will rely on a number of income sources to make their retirement dreams come to life. You might have a pension, Social Security, 401K, Roth IRAs, investment portfolios, real estate, passive income…and a certified financial planner will show you exactly how those income streams will flow together to fill your expectations. 

That same astute financial planner can also show you how the loss of just one of those revenue streams will affect your retirement outlook.

What will my withdrawal options be?

On your last day of work, you won’t head to the bank and withdraw a lump sum—not if you want the best return on your investment.

You will have a number of options for payout, and your financial retirement advisor can outline them for you. Granted, you’re not ready for that just yet, but as you envision your retirement (large sums of money for travel vs. a quiet life at home with foreseeable expenses), it can be helpful to know what your options will be.

Other Top Questions to Ask your Financial Advisor about Retirement

Will the questions listed above be the only ones you ever need to ask a retirement investment advisor? Certainly not! You will also have to ask all the questions that apply to your unique vision of your retirement. It’s crucial that you connect with a retirement specialist who’s willing to listen and work exclusively with you and your retirement finances to make your dreams come true. The Senior Life is your trusted resource for supporting you as you build the retirement of your wildest dreams. We will settle for nothing less than your peace of mind, as we guide you through this exciting journey toward reaping all the good things you’ve sown.

Ways to Save with Money Management Tips During Retirement

You have reached the finish line, but the retirement race is not over. You now need to learn how to preserve your financial assets to help you enjoy your retirement years. This is where a financial advisor can be particularly helpful.

Minimize Taxes

Most retirees live on fixed incomes, which means minimizing expenses becomes a major priority. The first expense you should target for managing is paying taxes. Retirement accounts come with different tax liabilities.

Here are a few tips for minimizing taxes during retirement:

  • Stay on top of how much you withdraw each year to avoid paying excess taxes
  • Consider converting to a Roth IRA to spread out distributions
  • Remember that mandatory retirement plan withdrawals start at age 70 1/2

 

Generate Retirement Income

Retirees have to walk a fine line when it comes to balancing investment risk and income. Although putting all your financial nest eggs into an international stock fund is considered too risky, trying to live off the interest produced by a CD does not cut it financially either. Living a meaningful retirement requires you to find investment vehicles that generate enough money to ensure you achieve your financial goals. A certified financial planner can help you generate more than sufficient retirement income.

Create Monthly Budgets

One of the keys to success for lowering expenses during retirement is to develop a blueprint to get where you want to go financially. The blueprint is called a monthly budget that accounts for fixed expenses such as housing and insurance costs, as well as less frequent expenditures that include paying for a day out with your grandchildren. You establish a set of financial priorities to help you maintain financial independence.

Tap into Your Home’s Equity

For many retirees, home equity is the largest source of untapped wealth. One of the reasons why you need to decide where you want to live is not about where geographically, but whereas moving into a smaller home. Downsizing your new home allows you to tap into the equity built in your previous home. Take the money generated by home equity and sock it away into an account that produces a steady stream of income.

Make Social Security a Waiting Game

The money received from Social Security between enrolling in the program at 62 and waiting until you turn 70 is staggering. As a guaranteed source of monthly income for the rest of your life, Social Security provides the peace-of-mind retirees need to live a robust life. However, delaying when you start receiving Social Security is a huge part of determining financial success during retirement.

Prepare for Inflation

Because of the reliance on fixed income streams, retirees are the most vulnerable to inflation. The most effective strategy to minimize the impact of inflation is knowing when to convert fixed-income assets into assets that do well during inflationary phases of the economy. For example, moving money out of a securities fund into a fund that concentrates on investing in precious metals helps defeat the scourge called inflation.

The Bottom Line

Planning for retirement as you approach it and following through with your plans requires a disciplined approach to money management. You can reach your retirement financial goals by using one or more of the following money management tools.

  • Financial planning
  • Credit card fraud protection
  • Life insurance policy
  • Online brokerage account
  • Checking and savings accounts

When you retire, you have not reached the end of the road for managing your money. You have to reassess your financial position constantly, and then make adjustments that meet your financial needs. Your financial priorities might have changed, or the economic climate has transformed into something quite different than it was 10 years ago.

You worked hard to save money before retirement. Make it last by staying on top of your money during retirement.

 

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