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Retirement Planning

Seniors in 47 out of 50 states lack the income they need achieve a desirable quality of life in retirement, according to a recent study from Bankrate. And while residents of Hawaii, Alaska, and South Carolina are more likely to be ahead of the game, the reality is that the vast majority of Americans — regardless of where they live — will fall short when it comes to having what they need to reach retirement goals.

But retirement plans shouldn't just be about having enough money; they should also include provisions for living well. One key part of making sure you're well-positioned to end up where you need to be? Making sure you're on the same page as your partner. Let's take a closer look at five proactive steps aimed at ensuring that you're in sync and on track to your best possible retirement.

Related Article: 23 Questions to help you decide if it's time for retirement.

5 Tips to Get Your Retirement Plans Back on Track

1. Share Your Vision

It's impossible to work together toward a common retirement goal if you're not mutually aware of each others' plans and preferences. Unfortunately, many couples neglect to think about retirement planning together. Don't fall victim to this ill-fated trend. Instead, designate time for a real conversation about your goals. This is also an ideal time to discuss any particular retirement-related concerns you or your partner may be harboring.

2. Embrace Full Disclosure

You may not think it will matter now how household tasks will be managed 10, 20, 30, or even 50 years into the future, but defining expectations sooner than later can spare you both heartache and headache in the long run. Keeping a calendar comprising both individual and joint responsibilities helps prevent assumptions — and the misunderstandings they often lead to — while keeping things in order.

3. Check-in Along the Way

Early discussions about retirement plans is only part of the big picture. Also essential? Maintaining open lines of communication along the way. Just as people change over time, so do their retirement goals. Scheduling routine times to reassess your retirement goals can help ensure that you end up in the best place — both literally and figuratively.

4. Accept Ambiguity

Retirement planning can be an immobilizing process. But just as bad as failing to make big decisions is another all-too-common pitfall: rushing into things entirely for the sake of crossing them off of your list. Retirement planning doesn't happen overnight; it's a process that evolves over time. Don't get caught up in worries about what's going to happen and when — particularly in instances where there's no obvious or agreeable course of action. Instead, take a step back. Giving yourself time can lead to unexpected solutions.

5. Enlist Assistance

Whether you've reached a planning impasse or you're simply looking for guidance, seeking the counsel of an external third party can help you overcome any challenges which arise along the way. Financial planners, retirement counselors, and estate planners can all provide critical professional advice aimed at helping you set and reach your retirement goals.

Even if you haven't given a single thought to retirement planning yet, you don't have to throw your hands up and hope for a sudden windfall. In fact, it's never too late to begin — or to continue — the conversation thanks to a breadth and depth of options when it comes to legal and financial help for seniors.

Are You Prepared for Retirement? Tips on How to Evaluate Your Finances and Prepare for Retirement

The best way to spend retirement varies from person to person. You may be planning to travel the world while someone else looks forward to finally having time to volunteer. Some folks can’t wait for full-time golfing while others plan on spending every minute they can with family. Or perhaps a balanced combination of all those things!

However you define happiness in retirement, you’re going to need enough money to finance the lifestyle you envision. A good way to get on track for retirement success is to evaluate your finances now. That will help you plan and eventually get where you want to be. Here are six basic tips for getting started.

Prepare for Retirement

1. Spell Out What You’d Like to Do Once You Retire

Having a clear idea of what you want your retirement years to look like is a good place to start. This helps you define your goals. Clearly-defined goals are key because they form the foundation for a financial plan. It’s straight out of the textbooks for Financial Planning 101.

You probably have some ideas already. But now it’s time to write them down. Prioritize your list, with your ‘must-haves’ at the top. Just stick to jotting down ideas and worry about budgeting later. Be specific and descriptive, not vague and general. For example:

  • Don’t say ‘travel.’ Say ‘take a river cruise in Eastern Europe’ or ‘rent an RV and tour the western states.’
  • Don’t say ‘spend time with family.’ Say ‘visit Canada with granddaughter’ or ‘have Sunday dinners with my son’s family.’
  • Don’t say ‘be more active.’ Say ‘buy a high-tech bicycle and bike three times a week’ or ‘join a gym and meet with a personal trainer two days a week’ or ‘take daily walks and aim for two miles each day.’

If you’re married, be sure to discuss your ideas with your spouse. And remember, this is the brainstorming phase of your retirement planning so don’t hold anything back!

2. Start a Running List of Financial Questions

You (or you and your spouse) should try to come up with a list of financial questions you’ll face as you near retirement. Use your list of goals to formulate a set of questions. This is how you will edge closer to eventually forming a retirement budget. Or, if you plan on seeking the advice of a financial planner or a retirement specialist, you’ll have already done much of the homework.

To begin, try and connect your goals from Step #1 to some real money questions. For example, if you see yourself traveling a lot, have you worked out how much that’s going to cost? If you’re planning to indulge your golfing obsession, have you thought through how will you afford the club fees?

Here are a few finance-related questions people typically come up with during this phase of planning:

  • Will I sell my home?
  • Will I move into a vacation home? A condo?
  • Will I consider an independent living community?
  • When will I begin drawing from Social Security?
  • Will I take on a part-time job?

3. Take Stock of Your Situation

This step involves inward reflection to see how you’re currently doing financially and in terms of savings. Ask yourself questions such as:

  • How much are you saving right now?
  • How much of your savings is dedicated to your retirement fund?
  • Are there areas of spending that you could minimize so you can start ramping up your retirement funds?
  • Do you know how retirement income is taxed?
  • Are your investments targeted for your retirement goals?

Sometimes this step is easier when you have a financial advisor.

4. Learn About Social Security

Do you know how much you’ll be getting from Social Security? It will depend on when you retire. Can you afford to retire early? Will you keep working beyond your retirement age?

These are tough questions, but the Social Security Administration website has a few handy tools to help you out. First, there’s a Retirement Estimator, which tells you what you’ll be getting based on what you’ve contributed so far.

5. Consider Your Health Budget

Next up is your health. While it may seem hard to predict what your body and mind have in store for you later on, your current health can be a good indicator. What does your current medical budget look like?

Secondly, thanks to advancing medical technology, Americans live a lot longer than previous generations. That’s good news but it also means you’ll need to make your money stretch another potentially several decades. According to the latest data, life expectancy in the United States is just under 79 years. Keep this in mind when you make financial decisions. And keep in mind some retirement communities factor increased healthcare costs into the cost of admission, meaning your expenses won’t necessarily rise just because your medical costs do.

6. Plan for When You’ll Need Help

Another ramification of your health status is whether you’ll need help with the daily tasks of living at some point later on. From seemingly small decision such as, “Do I need to install a handrail in my shower,” to larger ones like whether longer down the line you’ll be able to get up and down your stairs or bath yourself. As such, assisted living communities are becoming an essential part of people’s retirement plans these days.

Many offer Continuing Care, which means you can opt to enter at the lowest level of care (Independent Living) and transition into higher levels (Assisted Living, etc.) only when you need to. This type of scenario usually offers financial incentives for entering the community earlier on. You’ll want to learn about these communities and tour a few to know whether they’re an option for you.

One Last Word

If all you’ve managed to get out of this was to define your goals, it’s a great start. You’re more likely to make better decisions when you know what you want.

It’s been said before but it applies so well to retirement planning: the sooner you get started, the better off you’re likely to be. These tips represent only the tip of the iceberg when it comes to planning for your retirement. But you have to start somewhere and even if you’re quickly closing in on your retirement age, just having taken stock of your situation will ultimately pay off.

Remember – you don’t just want to retire, you want to retire comfortably. This means something different for everyone.

How to Create a Retirement Plan

When you think of a retirement plan, what do you think of? A pension plan? A 401(k)? Long term care insurance?

It’s true that all of these things could be part of a retirement plan, but in fact a retirement plan isn’t limited to savings. One easy definition to use is that a retirement plan is a plan that makes sure all your needs are covered after retirement, so you can continue to live comfortably.

Retirement planning is a complex topic. In this article we look at the key elements of retirement planning to give you a good foundation to start building your own retirement plan.

Whether you are planning for yourself, or helping middle-aged or older relatives prepare for retirement, it’s never too early to start.

Creating a retirement plan
(c) Can Stock Photo / leisuretime70

Retirement Plan 101: Start with an Honest Assessment of Your Needs

Too many of us take a cavalier attitude to retirement planning, thinking it’ll be ok when we reach that age, or that we will have some decent savings that will tide us over.

However, the amount of money you need to live on isn’t going to decrease dramatically when you retire, unless you choose to downscale across all areas of your life. In fact, you might find that with increased free time, you are actually spending more than you did when you were working.

After you retire, you will still need to pay bills and cover living expenses. There are also medical costs to consider, especially as we age. Depending on your living situation you’ll still need to think about rent or a mortgage (unless you have that house paid off, then good for you!).

Investopedia suggests that 80% of your current income per year is a good figure to start with. So, if you are currently earning $100,000 each year, you’ll need $80,000 for each year of your retirement.

When you look at it like that, the amount of money needed to retire can seem rather daunting. That’s why we recommend starting as early as possible – and helping older relatives to do the same, especially those over the age of 40. It doesn’t seem old, but starting at 40 only gives two to three decades of planning time before retirement.

Don’t Underestimate Anything

One of the most common mistakes people make when putting together a retirement plan is underestimating what they’re going to need, and how much money it takes to live comfortably while still enjoying retirement.

It’s all too easy to underestimate the amount of care we’ll need to plan for as we age, too. No one likes to think of losing their independence and needing in-home or senior care, but it’s a reality for many older Americans. A good retirement plan needs to cover those eventualities.

Life expectancy is also easy to underestimate. The CDC reports that people are living longer these days, and it’s important to take that into account when planning for retirement. Where in the past, people might have planned to cover their retirement up to age 75 or 80, it’s not uncommon now to see people living well beyond 80s and 90s.

Choose The Best Retirement Savings Method

Traditional pensions are not nearly as common as they once were, with many middle to late middle-aged people looking to 401(k) plans or IRAs as their primary sources of saving for retirement.

A 401(k) is an employer-sponsored retirement plan that allows employees to save a certain portion of their wages before tax. There is not usually a restriction on how much you can contribute to it, though there may be restrictions regarding how long you have to be with the company before you can draw on the 401(k), and how and when you can access the funds.

Most 401(k) plans include contribution matching, where the employer matches your contributions if you meet a certain contribution threshold. It’s best to take advantage of contribution matching if possible, or you’re just letting free money get away!

Although 401(k) plans are offered through employers, it’s also possible for self-employed people to administer a 401(k) for themselves.

IRA (Individual Retirement Accounts) are another option for retirement savings. Unlike most 401(k) plans, most IRAs do have a cap on how much you can save in them. IRAs come in two types: Traditional IRA and Roth IRA. Both have different rules on how and when you can save, withdraw funds, and whether you can make withdrawals tax-free.

Other ways to supplement retirement savings include owning and renting out properties or vacation homes, stocks and shares, or high-yield savings accounts.

Every individual circumstance is different, and we highly recommend you talk to an independent financial advisor about the best retirement planning method for you or your loved ones.

Don’t Forget Insurance

Another important facet of retirement planning is insurance. As well as life insurance, there is also the question of whether to take out disability insurance, which covers expenses and provides financial support to yourself or your family should you become ill or incapacitated, or pass away.

Ask yourself about the eventualities you might have to face, such as sickness or disability, so you can choose the most appropriate insurance for your situation.

Lifestyle Choices

This is an often overlooked part of retirement planning. How much you will need for retirement depends in part on your lifestyle choices. Ask yourself questions such as:

  • When do I plan to retire?
  • Where am I going to live? Am I going to downsize or move to a less expensive community, or do I want to stay here?
  • Perhaps I’d like to relocate someone completely new.
  • What kind of retirement do I want? Am I content to stay at home and live frugally? Or would I rather travel or be active in my local community?

Retirement planning takes time and careful consideration. We recommend setting aside time to sit down and start answering some of these questions, and considering every aspect of your retirement plan. The sooner you start, or help your loved ones to start, the less daunting it will be.

It’s much easier to enjoy the present when you know the future is taken care of, too.

4 Comments

  1. How much money can I earn each month ?? What is an allowable income to earn before Social Security takes money back because I maybe earning too much, according to them ?
  2. I’ve been working on a retirement plan with my wife, and it’s pretty difficult. You’re totally right that sometimes you can’t figure out the best choices to make. We’ve hit that point a lot, though, and I think it’s time we get some professional help with this so we can breathe.
  3. I highly appreciate you highlighted the importance of planning for retirement together as a couple and the value of establishing common goals aside from having enough financial resources for retirement. Raising awareness of benefits of planing in advance in itself is a great task you covered pretty well. Reality is most of us believe the most important retirement goals are health and sufficient funds but planning ahead how to actually live and organize those coming years is neglected. The best part is doesn’t cost anything to plan but having a purpose, a goal, an action plan is priceless and does not involve any money, just a dedicated time to think ahead.
  4. I like that you pointed out that you need to have communicated your goals for retirement. It seems like it would be a good idea to have a professional help you with your retirement goals. That way, you know if you are on track and how to achieve them as well.

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