The first and foremost concern about retirement planning is handling your expenses without a regular paycheck coming in. For a majority of people, there is negligible to no change when it comes to necessary expenditures such as shelter, utilities, food, etc.
To begin, you need to gauge an approximate amount of income which will last as long as needed. Next, you need to gather all the information about all the sources of income post-retirement such as your retirement accounts, social security, etc. And, you also need to know about any other options of income apart from your savings pool.
Towards this, you can start by knowing certain important dates. These dates will tell you when you can avail the benefits from your various retirement accounts. Here’s a brief overview about it:
• Social Security
You have to reach the standard retirement age before you are eligible for the benefits of social security. While you can start receiving its partial benefits at 62, but it decreases the amount of payout over time. So, if you wait until say 70, you can gain more.
It is advisable to start signing up three months before your birthday month and also refer to the other deadlines which apply to the signing up of part D of Medicare. You are eligible for Medicare at 65.
• Retirement Accounts
A majority of these accounts allow you to withdraw without a penalty at age 59 and a half. Traditional IRA accounts mandate that you begin taking the Required Minimum Distributions (RMDs) when you are 70 and a half. However, Roth IRAs don’t. You can handle the withdrawals from these accounts in three ways.
You can either withdraw ‘x’ amount from your IRA every month. Or you can completely withdraw all the IRA savings to buy an immediate annuity, which is a contract with an insurance company that assures you a certain income for the rest of your life. Or, you can do both – use a certain amount of the money for buying an annuity and save some for other investments, and also withdraw as per your needs.
One significant difference between traditional IRAs and Roth IRAs is when the savings must be withdrawn. Traditional IRAs require you to start taking required minimum distributions (RMDs) at age 70 and a half. Roth IRAs, on the other hand, don’t mandate withdrawals during the owner’s lifetime. So, if you don’t need the money, Roth IRAs can continue to grow tax-free throughout your life, making them ideal financial vehicles.
Apart from these, there are few other key points to remember which can help ensure that your retirement savings don’t run out quickly. They are as follows:
• Chalk out a detailed budget and keep a close track on every small and big expense against it. The essential and necessary expenditures should be considered first. And then you can assign the remaining fund for your retirement ‘wish list.’
• You need to be very careful about spending your retirement funds. Don’t step into your retirement with unrealistic expectations about how much you can withdraw. A little self-control in the first few years will help you maintain your savings pool for more years to come.
• While overspending is common, you should also remember to not spend too little. This means you should not overlook the needs for important things such as healthcare, proper diet, maintenance requirements of your home, etc. If at all you need to spend less because of limited funds, you should inquire about other financial aids such as public programs which support retired individuals.
Healthy money management is important to lead a financially-healthy retirement life. Learn and get to know more about the changing post-retirement financial trends and alternatives. Always stay abreast of such topics so that you can use your retirement fund wisely. You can also seek the services of a professional retirement planner who can help you manage your expenses post-retirement well so that you can enjoy your retired life the way you have envisioned.
Author Bio :
Rick Pendykoski is the owner of Self Directed Retirement Plans LLC, a retirement planning firm based in Goodyear, AZ. He has over three decades of experience working with investments and retirement planning, and over the last ten years has turned his focus to self-directed accounts and alternative investments. Rick regularly posts helpful tips and articles on his blog at SD Retirement as well as Business.com, SAP, MoneyForLunch, Biggerpocket, SocialMediaToday, and NuWireInvestor. If you need help and guidance with traditional or alternative investments, visit www.sdretirementplans.com.