It’s a tricky thing to maneuver retirement income, but at some point we all have to do it, preferably before we leave our jobs. As we approach retirement, we may be wondering exactly how much longer we need to work, and if we’re really prepared for managing the money we’ve spent our careers stowing away for such a day. It’s a lot of pressure. But like others before you, there’s no reason this has to be a point of stress, the key is to assess your situation and make a plan before you pull the plug on your working years. These strategies will help you determine if you’re prepared, and how to get in line, financially.
What’s Required to Retire
It’s hard to know exactly if you’re set up for retirement or not. The factors you should be considering are: when to begin social security benefits, if you should use savings to supplement delayed social security payments, and how to manage common retirement expenses like medical or transportation costs. Finally, what are the best decisions when it comes to home equity? Most middle income families (those with under $1 million in savings) have more value in their home than their savings account.
When Should You Take Social Security
First, it makes sense to first figure out when you’re planning to retire. You can alter this date, but start with your initial plan. This allows you to look at projected savings and social security payments, from which you can then deduce a regular income. But you have more to think about on this front – are you going to allocate assets in retirement? Have you already done this? What kind of yield will you potentially make on this front? From there, you can play around to determine when you should draw social security benefits, depending on your findings.
Look at All Income
So, considering the above, don’t forget that social security when you’re trying to figure out how to invest your assets. It’s a common to overlook this important item, but it makes an impact on how you determine your investments. Studies show seniors invest too conservatively because they don’t fully consider both social security benefits, and other sources of equity. That means a loss in overall income, since savings are left in the bank rather than maturing.
Research has found that taking a good, detailed look at all income can create a growth of up to seven times of those who are conservative or shy about spending. It’s understandable that retirees are reluctant to invest that money, most are in fact, so try speaking with a financial advisor about a comfortable plan.
Retiring Later
The big question – when do I do this? What you’ve already discovered about your projected finances greatly come into play, but you should also know the financial benefits of staying at work a little longer. Those who delay just three-six months generate the savings of one percent of their salary for 30 years. Things to bear in mind are your current salary, as well as what you have in the bank. If you feel confident, you can retire on time, but if you could use a little more cushioning, even if it’s to invest more, or delay your social security benefits, then it makes sense to push on for a little longer.
Taxes Change
Now that you don’t have your regular income, you’re going to pay less in taxes. They don’t go away completely, but because your income is reliant on investments, which are taxable income, and social security, which is not, the money you bring in per year falls at a lower tax bracket. So while you’re probably looking at lots of write offs and loopholes in your working years, you can probably forget that kind of thing in retirement. This has an effect on asset allocation strategies, as well as budgeting.
