7 Keys to Successful Retirement Planning

By on January 9, 2017

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If you thought buying a home or scoring that promotion was hard, just wait until you start planning for your retirement. Building that long-term financial safety net takes years of planning, time and money, but those who are successful will spend their golden years stress-free.

Plan for success and it shall be yours — these tips will help you plan for the not only the retirement you need but the one you want. Here are the seven keys to successful retirement planning:

#1 – Set Your Goals but Don’t Be Afraid to Aim High

How much money will you need to retire and still live comfortably? The Department of Labor estimates that you will need to replace 70 to 90 percent of your pre-retirement income for each year of retirement, so you can estimate your target goal based on your current income and life expectancy. Factors such as whether you own a home at retirement, vacationing habits and medical expenses will significantly impact how much you will need to save.

Of course, this is just a rough estimate. If you can save this amount you should be on track, but if you can save more it may help you live the life you want, last you into those late golden years and perhaps, leave something behind for the next generation. Be realistic, but do not be afraid to set your goals high – the worst that may happen is you earn just what you need and in the best case scenario you will have extra spending money.

#2 – Make a Retirement Plan and Put it in Writing

You are more likely to succeed in reaching your retirement goals if you have a plan of action for savings. According the American Savings Education Council, Americans who make a retirement plan save nearly five times the amount of money as those who haven’t bothered.

Whether you put in down on paper or write it up on the computer, weigh your current assets (property, savings accounts, 401ks, IRAs, review your social security statement for your expected benefits, investment portfolios, etc.) and savings rate to know where you stand. Then map out the steps you will take to reach your goal, whether that means increasing your automatic 401 k contributions, rolling over some savings into a IRA or eliminating outstanding debts.

Include periodic reviews in your plans to ensure you stay on track. Your lifestyle may change, market conditions can vary year to year and adjustments will be necessary. After all, you do not want to discover at age 60 that your nest egg is painfully inadequate and that your only hope for a comfy retirement is selling your home or relying on the kindness of family.

#3 – It’s Never Too Late to Save

While it is important to begin savings as early as you can since compound earnings can help you build a decent nest egg, don’t give up if you get a late start. The key to expecting success is having a positive outlook and understanding that late is better than never.

If you are over 55, the government offers tax savings on “catch-up” contributions so you can put a little bit more away. Contribute enough to your pension to trigger employer-matching, because who doesn’t love free money! In addition, with life expectancies growing you could still have another 30 years to earn returns on your investments, so remember, no matter how late you start, doing something is always better than doing nothing.

#4 – Explore Every Savings and Investment Vehicle Available to You

Sometimes the key to success is leaving no stone unturned in your search for retirement income. Chances are that one savings account or employer pension is not going to earn enough to reach your goals, so explore the gamut of investment products. Your advisor may be able to offer you qualified products which you have never even heard of in casual discussion with friends or family.

In addition to your 401k, IRAs, Roth IRAs, Simple IRAs, SEP-IRAs and Keoghs, you may qualify for permanent life insurance with cash-value investment vehicles, annuities, money mutual funds and more. Create a diversified portfolio of savings accounts, investments (stocks, bonds, property, etc.) and insurance which can thrive in upmarkets without getting obliterated in downturns.

#5 – Make Tax Efficiency Part of Your Plan to Save and Withdraw Retirement Income

”In this world nothing can be said to be certain, except death and taxes,” Benjamin Franklin.

There is no doubt that taxes will cost you a portion of your savings or investment income at some point — success is pre-setting strategies into your plan which minimizes their effect on your cash flow.

Consider diversifying your retirement savings across taxable, tax-deferred and tax-free accounts. This will allow you to fine-tune future withdrawals based on their relative tax impact so you have better control over your income. Tapping taxable accounts first often makes the most sense given that a retiree may qualify for lower income and capital gains tax brackets while allowing savings to continue to grow in tax-deferred IRA and Roth accounts.

#6 – Make a Plan Tap into Success and Use Your Retirement Income

Accumulating a nest egg for retirement is only half the challenge, the other half is transforming your investments into an income that will support you for the rest of your life. The goal will be to manage your retirement savings so you do not run out of money before you run out of time.

This will mean determining at what age you will begin withdrawing money from your retirement accounts. Deciding how much you will take each month/year. And figuring out from which tax-advantaged or taxable accounts you will pull money.

#7 – Use Strategies to Maximize Your Social Security Income

Social Security is likely to remain a part of your retirement plans and maximizing this benefit is important. The fact that Social Security benefits are indexed for inflation throughout the benefit period and continue to be paid to surviving spouses make this program unique and an important supplement to an investment portfolio.

To maximize benefits, you and your retirement planner will want to develop strategies for collecting Social Security. The age at which you decide to withdraw funds will impact how much you get for the rest of your life. There is a penalty of approximately 8% for each year benefits are taken before full retirement age. This reduction is permanent and also impacts surviving spouse benefits. The longer you delay the start of benefits, the more you will get monthly.

For most people, full retirement age is 66. The earliest you may begin collecting is at age 62, however, your monthly benefits will be 75 percent of the amount available to you at full retirement age (66). Even those who begin withdraws at 65, the year they reach full retirement age, will earn about 93% of their full retirement allotment. Waiting until full retirement age (66) will ensure you earn your full benefit, but the full benefit is not the maximum benefit you could earn.

For every year you wait to collect benefits past full retirement age (66) until you reach age 70, you can earn an extra 8 percent. That is 132% of full retirement benefits if you wait until 70, an increase which could boost your monthly income by a decent chunk of change. There are many ways to earn maximum benefits for you and/or your spouse, particularly if you are a married couple with one higher earning spouse. Work with your trusted advisor to review methods which work best with your overall retirement plan.

Success Needs a Safety Net of Expert Advisors

Retirement planning is a complex experience fraught with risk and it can be daunting to try to navigate the maze of products and strategies on one’s own. Consider working with a trusted financial advisor and a team of other financial professionals (tax preparers, investment brokers, insurance agents, etc.) to be your guide along the way and increase the chance that you will achieve your retirement goals, whatever those may be.

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About Harold Goldman

I am the founder of FinancialSafetyNet.org, and a Retirement Planning and Long-Term Care specialist. I am also the President of Emes Insurance Services, Inc., a Murrieta based insurance agency designed to help people with Retirement Planning and funding for College. I believe in educating my clients to become financially competent in an effort to develop plans for guaranteed income, protection against loss and tax-advantaged growth. To contact me Call (844)-376-2265

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