Friday, August 27, 2021

How to Plan for Retirement Financially

Retirement. It's something we all think about, but not many of us actually start planning for it. But with the average American retiring at age 62, you don't want to wait any longer if you're going to enjoy your retirement years stress-free and on your own terms. So here are five things that you can do right now in order to plan for a happy retirement!

#1 Start an Emergency Fund

First, if you haven't already, start an emergency fund. A lot can happen in the years leading up to retirement, and it's never a bad idea to have some extra cash on hand for emergencies. It also makes good financial sense as long as your savings don't interfere with your other goals (i.e., paying off debt or saving for college). So just remember that even $500 is better than nothing!

#2 Plan Ahead

Second, make sure you're planning ahead financially when deciding how much money to withdraw from retirement accounts each month during retirement. While it may sound like common sense, many retirees find themselves struggling because they didn't take into consideration inflation and are withdrawing too little from their accounts every month, which could lead to running out of money. To avoid this, try to withdraw no more than four percent of your retirement account balance in the first year of retirement and then adjust it each subsequent year as necessary.

#3 Think about Taxes

If you're withdrawing from a traditional IRA during retirement or if you plan on leaving money to heirs after death, be sure that you are taking advantage of tax planning strategies for both scenarios. There are some Gold Investing Pitfalls when it comes to your IRA, so be sure to avoid them early enough. Depending on how much income is coming out of an IRA account versus other taxable accounts will determine whether someone should choose a Roth conversion ladder over their life expectancy under IRS rules (in general), which allows people at least at age 59 to begin withdrawals without penalty. Also, keep in mind that some states offer state-tax-free inheritances while others do not. Talk to an estate planning attorney for more information on state-specific rules and regulations in your area.

#4 Get a Professional Opinion

Fourth, talk with your financial advisor about the best approach when taking withdrawals from retirement accounts during retirement because there are some strategies you can use that will allow you to withdraw a set amount each year without penalty or taxation regardless of what is happening with inflation which will enable people greater control over their income than just using a fixed rate withdrawal plan every year. For example, if someone's account balance has decreased by $20,000 due to market fluctuations one year but then increased again the next, they should be able to take larger withdrawals in years where their investments have done better versus smaller ones in years where markets have performed poorly since it all evens out in the end.

#5 Consider Health Care

Finally, don't forget about health care costs! Medicare is an essential part of retirement planning, and you should make sure that you understand all your options if you plan on signing up for it at age 65 or later when traditional medical insurance plans are required to accept applicants regardless of pre-existing conditions. It's also a good idea to learn more about Medigap policies because they can really help with out-of-pocket expenses, which no one wants to worry about during their golden years, so get educated before making any decisions!


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