Retirement

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5 Expenses To Plan For In Retirement

Whether you’ve been planning your retirement for some time or are just starting to get a jump on your post-career savings, you probably know you’re going to have to budget for certain things – like rent or mortgage payments, food, medical expenses, and other regular bills and needs. There are a few things you might not have thought of, though, that should still be built into your retirement budget.

 

Long-term Care

 

Nobody plans on getting the type of illness that results in the need for long-term care, which is why the expense often hits hard and without warning. Planning early to need long-term care at some point will give you more control over the situation, letting you decide if you would rather have in-home care or move into an assisted living facility, and giving you the power to choose from whom you want to receive care. Hopefully, it’s an expense you never need. It’s better to have the cash put aside though, and not need it, than to need it and not have it.

 

Unexpected Travel

 

You may be planning to travel the world during retirement, but don’t forget the one-time occasions that will require some travel, too. Things like a grandchild’s graduation, a class reunion, a friend’s birthday, weddings, or other occasion-based travel expenses are going to come up, and having a bit in reserve for special travel is going to help make sure you get to all the ones that are important to you.

 

Home Repair

 

Whether you rent or own, you know you’re going to have to pay for your housing, but don’t forget that your rent or mortgage isn’t the only expense that comes with your home. An appliance might go bad, plumbing might need work, a flood could do some damage – the same unexpected home circumstances that have been there your whole life have the same chance of occurring in retirement, but now you can’t simply work some overtime to cover the cost of that new dishwasher. Planning for at least some home maintenance costs could help offset if not entirely cover the burden.

 

Taxes

 

If you’re withdrawing from a traditional IRA or 401(k), don’t forget that there will be taxes each time you withdraw. If, for example, you’re withdrawing $4,000 a month, after taxes you could be left with $3,000 or less to cover your living expenses. Depending on the type of account you have, you may be taxed more or less, but that’s something you can’t get around, and it’s an important expense to plan for now so that you have a realistic idea of what you’ll be withdrawing versus what will actually hit your bank account.

Inflation

 

Another one of those things that you can’t predict but that will inevitably happen is inflation, which has the power to substantially lower your purchasing power in retirement. The social, economic, and political circumstances surrounding inflation are so hard to predict that it’s not worth speculating about exact rates and developing precise plans, but there are ways you can help mitigate inflation risk as you’re working out your retirement.

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Is Early Retirement Possible?

Is early retirement possible for the person that wants to travel around the world, pursue new hobbies and passionate fantasies or spend time with their family? The answer is in your finances, retirement planning, your lifestyle, objectives and other factors. For early retirement, you would have to factor in all the financial and emotional elements that go into this decision. To find out if you are ready, there are some important questions to ask. Let’s take a look.

Your Finances

How much do you need to retire and how much money is really enough to do so? There is no magic number of how much money you will need to save and invest for early retirement. However, with help from a financial advisor, you could come with up with a plan or technique to even start thinking about it. If all else fails, use the standby rule of 4 percent. What does this mean? It means that you would extract four percent from your retirement portfolio each year and put that aside for early retirement. However, you have to commit to this for up to thirty or forty years.

Withdrawal Approach

You could also consider choosing an adaptive withdrawal approach. What does this mean? This will allow you to consider taking flexible distributions from your retirement account. Once you take care of those essential needs that you have, your financial advisor could look at the remaining assets and adjust its distributions, adapting to things like your age or the performance of your investments. Those withdrawals will have to be sufficiently flexible to absorb any unanticipated circumstances that could occur in the investment market or in your life.  

Access to Cash

If you are going to retire early, you must have easy access to cash. As a matter of fact, you should be able to access an entire year of cash to spend maintaining your lifestyle and paying for expenses. You should also have a year’s worth of finances to cover short term certificates and bonds in your investment portfolio. What it comes down to is the rate of distribution and income objectives. To come up with those estimates, you need to consult with your financial advisor and work out a plan that is best for you.

The Deciding Factors

To retire early, you must have a financial goal and sound planning, using the expertise and experience of a financial advisor who will help to incorporate your plan into the deciding factors so you can have enough funds for long term use.

The Retirement Years

You also want to think about how you will spend your retirement years. How much money will you need to carry out those desires? If you retire early, it means that you will likely be more active because you are going to be younger than the normal retiree. Bear in mind that if you were to do more at that age, it would require more spending to keep up with your active lifestyle. Therefore, speak to a financial advisor to determine if those figures match with your goals and expectations.

 

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How Women Can Stay Ahead of the Retirement Saving Game

Women tend to know exactly what they want and are already carrying out the right strategy or planning for their retirement savings. Many studies have been done to prove this point and it is important to note that up to 11 percent more women will participate in a retirement savings plan at their place of employment than men would likely do. Voluntary enrollment plans consist of 14 percent more women likely to participate than men. For the women participating, 7 percent or higher will save more than men would. Investments made in a five year span showed considerably more returns for women in comparison to men. However, what else can women do to stay ahead of the retirement saving game?

Lagging Behind

Yes, women are certainly surpassing their male counterpart in facets of retirement savings. However research indicates that women are being left behind in aspects where it matters the most and that is in the amount that they are setting aside for retirement. This usually stems from the different levels of income that women have in comparison to men. Even though, we don’t live in a perfect world, it has been documented that men make more money in varying industries than women do. So, this is the reason for the imbalance in income levels. Men who took part in a retirement savings plan at their place of employment typically earned up to 33 percent more income than women did.

The Disparity

Regardless of the disparity, it is obvious that both men and women should put more into their retirement funds in order to live comfortably upon retiring. No matter what your gender, you should save for the latter years of your life. Yes, you will retire because there is no way around that as you age, but you don’t want to do so with any added stress or have to make any drastic changes to the lifestyle that you have always enjoyed. Just a few small changes to the amount of money that you put into your retirement savings can make a whole lot of difference.

Get the Numbers Right

Speak to a financial advisor about how much money you will need to retire comfortably. By running the numbers, you will know how much to put away. As it stands now, many women don’t have an idea how much they should save now for the retirement years. Most of them are going off assumption, which is the wrong way to go about it. Start with doing a projection of your savings in years. Do this for the short term and long term, working out ways that it can be done to meet your retirement goals.

Other Factors

There are several factors that will influence the amount that you need. Your lifestyle during the retirement is one of them as well the plans that you have on how much you will spend at that time. The rule of thumb is saving up to sixteen times what your yearly income is. However, you should include your social security benefits in the number because this is a huge part of your savings. Lastly, for other savings, you should automate the process so that you don’t see it, but it goes directly to a bank account.

 

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Are You Really in a Financial Condition to Retire?

If you are on your way to retirement, it means that you should have already had all your financial stuff in order. You would have had to be saving money years before; at least 20 years ago and have a solid budget and financial plan. You should also have had your investment portfolio making money for you. Your savings should be enough for you to live from. You should be in control of your financial future. Does this all describe where you are right now in your financial life? How are your spending and savings habit? What is your financial condition? Well, below are some things that you should pay attention to in order to know whether you are ready for retirement or not.

Your Bills

If you are in a struggle to pay your household expenses and you are close to retirement age, you may have a problem. Most financial expert would suggest that you make plans to change your lifestyle to be able to live off three quarters of your retirement income prior to retirement. For this reason, you may have to reduce your spending and expenses, using this to contribute to your retirement fund. If your retirement plan includes traveling the world and going on cruises, you are going to need a substantial amount of money in your retirement account. So, if you are struggling with bills now, then you have to reassert yourself and possibly seek financial advice on how to handle your retirement plan.

Too Much Debt

If you find yourself with too much debt as you are approaching retirement, you should pay careful attention to your financial situation. You need to reduce or get rid of credit card payments. If you have a car loan, it is time to possibly sell or trade in that vehicle for a used vehicle. If you are over 60 years of age, it may be time to speak to a mortgage professional about a reverse mortgage. You could also think of downsizing and getting a smaller home or apartment, especially if your children have already left the nest. Get into the habit of paying down your debts, whether you are close to retirement or not. In so doing, you will have the discipline to continue doing this up to retirement age. If you need help paying down your debt faster, you could consider one of these effective Tennessee flex loans.

Handling the Major Expenses

It may be time to get serious about handling those major expenses before retirement such as changing a bad roof, buying a vacation home or even repaving your driveway. When you take care of these things beforehand, it leaves room for other expenses that are not so pressing. You don’t want to take on a car payment at a certain age because then this is the kind of expense that can leave you feeling overwhelmed each month, especially living off a fixed income.

Social Security Income

Do you have an idea what your social security income will be? Is it enough to take care of your expenses? You have to do the math beforehand in finding out how much you will receive each month for social security. To be prepared for retirement, you could begin by contacting the social security office to know the amount that you will receive if you were retire earlier or later.

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Different Ways to Generate Income From Certain Retirement Investments

Did you know that retirement savings is just half of what you have to do to prepare for your latter years? Believe it or not, this is true. The other major and important item of consideration is how you are going to generate income from your retirement savings. Most retirement periods last up to twenty or more years and so the money that you may have accumulated in your investment accounts might not be sufficient, especially due to inflation. As a retiree, you have to ensure that your money is growing and generating income that you can use to live off. Without the appropriate finance, you may be forced to take a closer look at your lifestyle and make changes.

Access to Income

For a lot of retirees, there are two primary means of accessing income; one is from the regular monthly income that you receive and can count on such as social security benefits, annuity or pension. Secondly, there are discretionary funds that the retiree has accumulated over the years and can draw from. Examples of these discretionary funds are savings account, employer-sponsored 401K savings or IRA. The latter types of discretionary funds provide retirees with a way to generate income.

What about Stocks?

If you have invested in stocks from your 401K or IRA, you can use that to collect dividends. However, you have to invest in the type of stocks that pay dividends. A financial specialist will be able to guide you to the right stock picks. You can choose to receive dividends on an annual basis or quarterly basis. Of course, the stock yield will be different for each pick since stock dividends are determined by the different companies.

High and Low Yield

If you have a high yield stock, it is more risky, and lower paying dividends carry less risk and more stability. It probably is best to have both in your stock portfolio in order to balance the risks. You have another option of lower risk and that is investing in equity income funds, which are similar in nature to mutual funds, especially since you are investing in the company’s share that pay out the dividend. From this, you will receive a decent yield and therefore, consistent money to live off.

What about Bonds?

Like stocks, bonds are a great way to generate income for retirees, even in a market where the rates are increasing. Why are bonds so attractive to retired investors? The reason is that bonds offer interest payments to the investor, in addition to specific payouts as the bond becomes mature. Yes, the yield may be lower, but the generated income is stable and reliable. However, it is best to avoid bonds with long duration periods since the investment environment is controlled by the Federal Reserve and the continued rise in interest rates may hurt you. You should instead, invest in various different bonds for a cushion against increasing interest rates. If you are not interested in purchasing individual bonds, then you could consider bond funds. A professional financial specialist will be able to direct you wisely in your choices.

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How to Handle Risk in Retirement

In any investment, you will experience risk. Retirement investments are not different, even though, the risks may be lower. When you are thinking about retirement, though, it is best to consult with a retirement specialist or financial advisor who specializes in retirement. You want to make sure that your risks are calculated. That is why, it is important to start investing in your retirement at a younger age. In so doing, you will have enough time to rebound if your investment does not pay off. However, once you are nearing the age of retirement, you cannot take the same risks. In the same token, your risks don’t have to seem scary, especially if you have a knowledgeable professional working on your behalf. It is best to sit down with your financial advisor and discuss the risks of each investment and understand what to look for.

All In One

There are several ‘all in one’ investment funds that are specifically designed to make the investment process simple and giving you an easier way to lessen your risks and effectively manage your portfolio. The ‘all in one’ fund will invest in individual bonds and stocks to lessen the risk. The fund automatically rebalances the portfolio so you don’t have to remember everything on your own. To establish whether this ‘all in one’ fund is for you, it is best to speak to a financial advisor on allocation of assets and the fund’s target date, just to name a few things up for discussion.

Annual Assessment

You will handle your retirement funds effectively by scheduling an annual assessment of your portfolio with your financial advisor. This allows you to discuss any pending risks and make the necessary shift to lower your risks. An annual assessment is as important as the yearly exam you schedule with your doctor in order to make sure that you are healthy. It is also similar to the overall done to your vehicle by the mechanic for optimum performance. You should not go a year without revisiting your portfolio for determining risks and revising your financial plan for retirement. In fact, it is best to check with your financial advisor twice for the year to make sure that you are financially healthy for retirement.

Tax Breaks

It is also important to look at any tax breaks allowed by law. As a retiree, you have a few more options than the normal tax payer. However, you should look at the possible risks related to each of the options available to you. The first option is social security, which allows you certain tax breaks. It depends on the age that you started to collect on your social security payments. It also depends on the accounts that this may be combined with. If you are still holding down a job, you should take advantage of the compound effect allowed for tax-deferred income in a 401K program sponsored by your employer.

Lastly, you should spread out the possible risks. Not many people have a huge amount of money to maximize 401K contributions. Most retirees look for sizeable returns and a decent amount of money in their portfolio to arrive when they have retired. For this reason, wise investment in stocks and bonds is important.

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The Benefits of Downsizing for Extra Retirement Savings

In the United States, we live in an environment where big is assumed to be better. Supersizing is the norm for most Americans and so for that reason, downsizing is not usually a consideration or an appeal. In Texas, for example, people will oftentimes boast on how big their state is. However, Alaska could assume the most bragging rights because it is twice the size of Texas. Mount Rushmore exemplifies our passion for size. There are four presidential sculptures that are at a colossal height of sixty feet tall. Why say all of that? Well, if you are saving towards retirement, big is not always better. Many people, though, are not keen on trading in their expensive vehicles for an affordable one or their big mansion for a two bedroom townhome or condominium. That would be asking too much, right? No, it wouldn’t.

 

Retire Comfortably

If you want to retire and be able to live comfortably, you may have to consider doing so. Downsizing should not be an option. It should be part of your retirement plan. It is a necessity to use this as a survival strategy in order to extend your savings to the end of your life. Remember, an unfortunate and unexpected life event can catapult your retirement plans into a spiral.

Planning for Retirement

If you are over fifty years of age and you own your home and the kids have left the nest, you may be suffering from empty nest syndrome. You may want to hold on to the sentimental value of that home. You may find reasons to keep it, probably hoping that the children would come back home. It is time to accept that you are going into retirement some time or other. You should also accept the fact that you have to make certain changes. It is best to downsize earlier rather than later.

Do it Sooner

Don’t wait to downsize. Take the necessary plunge so you can be prepared for your retirement. Here are some things you can do to downsize your life:

  •       Eliminate clutter
  •       Donate things you don’t need (You can actually use this as a tax deduction)
  •       Trim your budget in order to improve your bottom line
  •       Sell one of your vehicles
  •       Cut down insurance deductibles
  •       Move into a townhouse or condo and sell your large home

Reduce Dwelling Space

As it relates to your dwelling space, less is always more. If you want to enjoy substantial savings, housing is the major area to examine. When you downsize your dwelling space, you reduce the added requirements of maintaining the property. It is better to get a smaller space with less maintenance. Downsizing also helps you to save money on home insurance and property taxes. This can greatly affect your cash flow in a positive way. You will also lighten and reduce your mortgage or rent load.

Even with all the savings involved when you downsize your home, there are many people who are not able to make up their minds to do it. The emotional attachment is too much for them and so they end up carrying all that debt right into retirement. That is not a sensible decision. It is best to speak to your financial advisor about this.

 

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Retirement Doesn’t Mean that You Quit Planning Financially

For a large portion of your life, you have to save and plan for your retirement. Even once you retire, the process of planning for retirement has to continue. This is for several reasons, but more importantly for your financial freedom and financial security. For many persons, the objective is to avoid retiring in the same traditional way that others do. You want to retire in such a way that you can really enjoy the years of your retirement.

A Personal Decision

Some people in retirement choose to spend their savings in a controlled manner until their death. Others tend to want to hold on to it and leave some of the money behind as an inheritance to children and grandchildren. However, this should be a personal decision because it will depend on whether there is sufficient investment allowing the retiree to live only on the return on investment or having enough savings to use while in retirement. Not all retirees have the same flexibility. For instance, if your savings were only $100,000 and $35,000 was needed each year to take care of living expenses, you would have a financial quandary, whether you were to invest these funds at a ten percent return rate. Your savings could be used up in about six years and then you will have to depend on the government’s welfare program to survive. Or you may have to work with a company as a retiree where you would be greatly underpaid.

Rate of Withdrawal

Let’s assume that you have done your due diligence by saving and investing in your retirement. If you did this, then you would have a very nice nest egg as a cushion. However, it is important to know the amount of money you can actually take from that amount every year without using everything prior to the end of your life. In other words, what is your rate of withdrawal? Ideally, the best thing is to use an amount that you need, especially in the early part of your retirement. In the beginning, you will want to travel and indulge in your favorite hobbies. However, try not to use up too much of your nest egg to do so. Do everything in moderation and don’t dig too deep into your retirement funds since you have to be prepared for the unexpected such as high medical bills and other expenses that may crop up.

Change in Lifestyle Choices

When retired, you may have to change your lifestyle choices to cut down on cost. When you are planning on being involved in anything that requires spending, it is best that you evaluate this first. Keep your spending habit in check as you probably did while saving up for your retirement. Keep good records as to how much you spend. If you have to book a vacation cruise, shop around first for the best price. The same is true if you were to buy a new golf club or any other important purchases.

Personal financial growth does not end when you get to 65 or older. Retirement is the beginning of new financial planning details. To live with the money that you have saved or invested for retirement, you have to carefully monitor your spending and risks. While you enjoy the leisure, you should have a financial planner take care of the details for you.

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5 Places You Didn’t Know You Could Afford To Retire

Whether you just want a relaxing beachside retirement or you’ve decided to spend your golden years abroad, sometimes the fantasy of where you’ll retire seems a lot better than what your account can handle. That doesn’t have to be the case, though. Here are five incredible places to which you can retire without breaking the bank.

 

Panama

Whether you’re looking for a coastal retreat, an urban oasis, or a combination of both, you can live comfortably in Panama for $1,000 a month with rentals that will set you back $400 to $500, and utilities are a nominal expense. Food will be fresh and affordable, the people will be kind and enthusiastic, the climate will be warm, and the drinks will be cool. The Panamanian balboa is the local currency, but the US dollar also circulates as legal tender there, so you don’t even have to worry about exchange rates.

 

Thailand

Northern Thailand, in particular, is rich in food, culture, and destinations, with towns like Chiang Rai and cities like Chiang Mai combining thousands of years of traditional architecture with stunning vistas of forested mountains and more urban landscapes. For $1,000 a month, you can live comfortably shopping in open-air markets and enjoying Western and Thai style restaurants interchangeably, and for $2,000 a month you can live like royalty. Medical costs are reportedly low in Thailand, as well, and service is quick and quality.

 

Rockport, TX

Just outside Corpus Christi, Rockport is a community with a thriving retiree population, as well as some families, creating a vibrant mix of people and interests. With cost of living 9% below the national average and homes in the $100,000 to $150,000 range, Rockport provides an ocean escape, city amenities, and a subtropical climate all year round. You’ll also be close to the island town of Port Aransas, which has prominent fishing, beach, and resort communities and seasonal festivals that anyone would enjoy.

 

Belize

A house in Belize will run you about $400 a month, and while you’ll be surrounded by jungle and Mayan ruins, you won’t have any problem feeling at home. The US dollar is readily accepted in Belize, and the local government makes it easy to establish residency and even start your own business as an expat (if you’re looking for something to keep you busy on the side). English is also the first language there, so while you’ll hear Spanish, Creole, and other local dialects spoken on the street, you won’t have to know them to function on a daily basis.

 

Portugal

Less than $2,000 a month for a couple will keep you well-stocked in Portugal. Real estate in the Mediterranean country has fallen sharply since the worldwide financial crisis hit, and despite fluctuating Euro exchange rates, quality housing has stayed relatively cheap. You can enjoy fresh fish, good wine, and a nation full of light-hearted, friendly people who know how to make the most out of life. Portugal is also a great jumping-off point for travel to all of Europe, connecting you with destinations like Spain, Italy, Greece, Germany, Sweden, France, Denmark, England, and so many others.

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Things to Consider When Creating a Retirement Plan

There are so many Americans concerned about the amount of money that will remain after reaching retirement. Even with a decent income, once you get to retirement, your normal savings won’t be enough to allow for the same lifestyle that you are accustomed to. However, some saving is better than none. You also need to make other plans for your retirement so that you are not caught unaware. There are several things that you should know to determine what to put in your retirement plan.

How Much Time is Left?

You should consider how much time is left to go into retirement. You also need to know how long the savings that you currently have will last. Determine the exact date of retirement. Do so by subtracting your current age from the intended age of retirement. From the result of your subtraction, you will be able to establish the amount of savings needed for the total number of years. You will not be able to tell how long you will live, but work out the retirement savings to 100 years. This will give you the best financial cushion. You need to know all of this prior to your retirement planning.

Current Savings

You should determine how much you will be able to afford to put into your retirement fund each month. This means that you should maintain a budget, if you don’t have one yet. It doesn’t matter your age. You should begin saving now. If you are going to retirement within the next twenty years, for example and you put $50 each month into a savings account for the entire time, you would end up with $12,000 in savings at the age of retirement. Of course, $12,000 will not be sufficient to live on. Therefore, make plans to increase the savings each month, especially if you have an increase in income.

The Risks

To save for retirement, you should think about the amount of risks that you are willing to assume. Choose a retirement plans based on your level of tolerance for risks. You must realize that you might lose money in a 401K or IRA plan since these are run by the condition and activity of the stock market. Fixed annuities are not as risky and you earn interest with no financial risk. It is best to meet with a financial professional to talk about the risks and your comfort level.

Access to Your Money

If you have an emergency, which can occur, you want to know if you will be able to access your retirement fund early. This is true if you experience a long term illness or injury and medical bills pile up or you have to pay for a child’s college education. There are restrictions and even fines associated with some retirement plans. Be aware of this.

Closing

Retirement planning is one of the most essential decisions that you could make financially and yet so many individuals don’t consider the options available to them in order to establish a plan. Don’t be like others. Get this done as soon as possible.