Address these essential elements of retirement planning
During your retirement years, you may expect to receive Social Security payments. A few people may also receive payments from public or private pension plans. However, it is best not to rely on such sources to provide a sufficient amount of income to ensure that you retire comfortably. Although you may receive income from both sources, it would be beneficial to have retirement income that is diversified.
Rather than depending on pension or Social Security benefits, you should be responsible for your own retirement planning. Here are some measures that you can implement so that you can have more control over your retirement:
- If you are employed by a company that offers matching through a retirement savings plan, then it is to your advantage to participate in such a plan. Many employers currently offer retirement plans consisting of matching contributions in lieu of a pension.
- By starting to save early, you can realize the benefits of compound interest. However, even if you begin saving late in your career, you may still be able to retire comfortably. You may have to compensate for the late start by increasing the rate at which you save, reducing your expenses, or working a few more years than you had anticipated.
- In addition, you may need to change your lifestyle by living below your means, and establishing a budget that permits you to accumulate a savings that is intended for your investment in retirement. Every month, you will have to spend a lesser amount than that which you earn, and invest the difference.
By living below your means, you will realize your objective of applying more funds toward your retirement and choosing a lifestyle that encourages you to live on a reduced budget. This will allow you to realize your retirement goals more quickly.
- Furthermore, it would be advantageous for you to make full use of your tax deferral options for retirement, including IRAs and retirement plans through your employers, such as 401(k)s, 457s, 403(b)s or the Thrift Savings Plan. In some instances, you can use a health savings account to help fund your retirement.
Tax-deferred accounts help you increase your retirement income more rapidly because no taxes are owed on the funds or the growth until such time as when you make withdrawals during your retirement. Moreover, delaying payment of taxes on the dividends, interest and capital gains every year permits your retirement account to grow at a faster rate. While you will likely be able to benefit from Social Security or a public pension plan, it is recommended that you not rely on either choice, but rather, take control of your retirement planning.
It would be helpful for you to consult a financial advisor who can develop a plan that will enable you to meet your retirement objectives. Some fundamental questions that you should consider are:
- the age at which you would like to retire;
- the number of years you wish your retirement income to last;
- the amount of income you anticipate receiving from Social Security, pension, dividends, rental properties, and other sources.
One rule to keep in mind is that people require 70 percent to 100 percent of their income prior to retirement in order to keep the same lifestyle on a yearly basis. However, this is subject to change, depending on such factors as whether you wish to travel and whether your mortgage is paid off. You should also consider the cost of living and unforeseen expenses, such as health care. A financial advisor can assist you in confronting these issues, and establishing a workable retirement plan.
The elder law attorneys at Hook Law Center assist Virginia families with will preparation, trust & estate administration, guardianships and conservatorships, long-term care planning, special needs planning, veterans benefits, and more. To learn more, visit https://hooklawcenter.com/ or call 757-399-7506.