In a previous blog, we went over important retirement milestones throughout your life; from starting a 401-k to investing to getting the most out of your social security. In this blog, we will narrow it down to the five years before retirement. These are the years where you can focus on saving where you want to save and look at how much you are spending to have a spending strategy during retirement. These years can be scary and worrisome, but with the help of KNR Consulting Group, you can be confident that your retirement savings will allow you to have a life worry free after your working days are done. Read through some tips on how to plan for retirement.
You can start withdrawing from social security at the age of 62; however, the longer you wait, the more money you will get. For each year you are not withdrawing, you can save seven to eight percent more money. For divorced couples, or if you are widowed, you can claim the record of an ex-spouse. Discuss varying when you and your partner claim social security benefits with your financial advisor.
Evaluate Your Savings
After years of savings, it can look like a big number, but when you break it down into annual and monthly amounts, that amount might not be as much as you were expecting. Plan on four percent of your savings per year as your monthly income.
What you spend during working years may not equal what you will spend after retirement. Track all of your spending including mortgage payments, travel, daily expenses, car payments, medication expenses, etc. and also consider what you may spend during retirement that you are not paying for currently. Additional travel expenses could add up to a significant amount. Use programs online that will track expenses for you so you don’t have the additional stress of keeping receipts.
Many people plan on moving after retirement depending on where family has settled, weather conditions, and lifestyle needs. If you do plan on relocating, spend a good amount of time where you are thinking of moving to in order to be sure that the move will be worthwhile. Consider how the expense will work out when selling your current home and buying a new house.
Look at how you have your 401-k or IRAs set up and how that money will be taxed. Taxes will always take out a significant amount of money. If possible, switch these accounts over to a Roth IRA, the money in these accounts is not taxed when withdrawn from.
Test out Plans
Imagining a life during retirement filled with golf, dance lessons, hiking, fishing, quilting, sounds like a dream come true, but if you don’t actually like these activities, spending your retirement money on them could be costly. Try out these activities before you retire so you know one way or the other if you want to spend your time doing them.
Even though this scenario isn’t preferable, if it’s necessary, a part-time job might be necessary. Find a part time job ahead of time where you know you will have a steady income. If you plan on consulting or working part-time for your current job, make connections now rather than later. Having additional income during retirement is never a bad thing.
Retirement planning is necessary from an early age, but the years just before retirement are where you will learn exactly what you need and you can begin thinking about how you want to spend your retirement years. However old you are, it’s never too late to consult with a financial advisor to learn about social security benefits, 401-k withdrawals, and planning for retirement. Get the most out of your money and contact KNR Consulting Group today.