Risk management is at the core of any sound financial plan. But it takes on heightened importance in retirement. Once you leave the working world, you don’t have the benefit of a regular paycheck. It could be difficult to bounce back from a market downturn or a costly emergency.
Health care costs can be an especially dangerous risk for retirees. Fidelity estimates that the average married couple will spend $275,000 on out-of-pocket health care expenses.1 That figure doesn’t even include long-term care, which can cost thousands of dollars per month and may be needed for several years.
Are you one of the fortunate few who will be able to rely on a pension in retirement? Pensions are quickly disappearing from employer benefit menus. In 1998, 58 percent of Fortune 500 companies offered pensions, also known as defined benefit plans. By 2015 that figure was down to 20 percent.1
The shift away from pensions is largely due to the growing popularity of the 401(k), which is known as a defined contribution plan. In a pension, the employer is responsible for funding the plan and providing a retirement benefit. In a 401(k) and similar plans, the employer may make some contributions, but the funding responsibility largely lies with the employee.
Tax time is here again. If you’re recently retired, you may be surprised to learn that taxes still play a big role in retirement. Many retirees assume that because they are no longer earning income, taxes won’t be a major expense.
The truth, though, is that taxes are often a significant expense for retirees. Many common sources of retirement income are taxable. Social Security is taxable, as are distributions from traditional IRAs, 401(k) plans and other qualified plans. Pension benefits usually are also taxable.
If you don’t plan ahead, you could find that taxes take a big bite out of your retirement budget. You may have less spendable income than you’d expected, and that could limit your ability to enjoy retirement.
When is the right time for you to file for Social Security benefits? It’s a question that nearly every retiree faces. According to the Social Security Administration, almost 90 percent of all workers age 65 and over rely on Social Security income.1 That means Social Security is likely to play a role in your income strategy, no matter your retirement plans.
Of course, not all Social Security benefits are equal. Your benefit amount depends on your career earnings and how long you worked. More important, though, it depends largely on when you file for benefits.
You are eligible to file as early as age 62. However, your full retirement age (FRA) likely falls between your 66th and 67th birthdays. If you file before your FRA, you could see your benefits permanently reduced as much as 25 percent.2
Retirement is a major financial challenge even for the most disciplined savers. While you will likely benefit from Social Security payments, you may not have any other form of guaranteed lifetime income. That means you may need to fund much of your retirement expenses with savings.
One of the biggest challenges retirees face is funding a retirement that could potentially span decades. People are living longer than ever. If you retire in your early 60s, it’s possible that your retirement could last 30 years. In fact, you may spend more time in retirement than you did saving for retirement.
Concerned that you’re behind on your retirement income planning? You’re not alone. According to a 2017 study from Gallup, more than 50 percent of Americans are worried they won’t have enough money for retirement.1 Retirement has been Americans’ most-cited financial worry every year that Gallup has conducted the study.
Even if you are behind, the good news is that you can quickly implement a plan to catch up. Make 2018 the year you review your retirement income planning and take action to stabilize your financial future.
The new year is here. Do you have a list of resolutions? Do you have plans to hit the gym, pursue a new hobby or finally take that big vacation? The new year is the perfect time to reassess your situation and develop a strategy to make big changes.
If you’re like many families, your list of resolutions could include some financial items. Maybe you want to get serious about eliminating debt, or perhaps you want to get your retirement savings back on track. Below are five simple steps you can take to regain control of your finances in 2018:
Do you have a bucket list for retirement? If you’re not familiar, a bucket list includes all the things you want to do before you “kick the bucket.” Your list may include things like traveling the world, pursuing a new hobby or visiting friends and family.
Of course, to check every box on your bucket list, you’ll need to have a strong financial foundation as you enter retirement. That’s why you may want to create a preretirement bucket list that includes all the financial milestones you want to meet before you stop working.
You’ve no doubt worked hard during your career to save money and accumulate assets. Your estate may include investments, cash, retirement accounts, real estate and even personal property. While you may need to use some of those assets to fund your retirement, you likely also want to leave as much of your estate as possible to your loved ones.
Unfortunately, it’s possible that not all of your assets will be passed on to your heirs. In fact, a large portion of your estate could be used to pay for things like court fees, lawyer expenses, taxes and much more. Your family may end up with only a fraction of your estate.
What’s the recipe for a successful and comfortable retirement? There are many ingredients, including disciplined saving, self-restraint when it comes to spending, a plan to pay for medical expenses and much more.
Three of the most important components of any successful retirement involve your mindset and how you approach the retirement planning process. Call them the “3 Rs.” If you can successfully master the 3 Rs, then you will likely have a solid financial foundation for your retirement.