How to Maximize Your Retirement Savings
Not having enough money while retired is one of the biggest fears among the senior population. This fear is realistic considering that people are living longer and the price of healthcare continues to rise. The key to quelling this fear is proper financial planning. Consider the following retirement savings tips to help ensure you stretch the most out of your retirement dollars, while giving yourself the freedom to have some fun in your golden years.
Surprisingly, deciding to work an additional year beyond your set retired date can significantly enhance your standard of living during retirement. Not only will your Social Security benefits increase, but your other assets will have an extra 365 days to mature. You can also consider gradually phasing out of the workplace. Maybe take on fewer responsibilities or change your job status to part-time.
Our health is important at all stages of life, but the emphasis we place on our health tends to heighten as we age, especially when you take ever-increasing healthcare costs into consideration. That’s why it’s strongly advised to keep your health at the forefront during this time. Visit your doctors for regular screenings, take your medications, eat right, drink plenty of water, and get enough sleep.
Quite often, chronic health problems, such as diabetes and high blood pressure, can be avoided simply by living a healthy lifestyle. Not to mention, this will likely reduce your healthcare costs in retirement as well. However, this doesn’t mean that as long as you live a healthy lifestyle, you don’t need to be proactive about your health. There may come a time when you or your spouse will require long-term health care. Whether you choose to purchase long-term care insurance or simply save more money for retirement, you’ll want to be sure that you are prepared for this possible scenario.
Optimize Social Security Benefits
The earliest age that you can begin claiming your Social Security benefits is 62, however, this doesn’t come without its drawbacks. Doing so, means you’ll experience a reduction in benefits. Therefore, you’re better off waiting until you’re 67 years old, which is the full retirement age if you were born after 1960, as your benefits will no longer be reduced at this point.
However, the most financially optimal solution is to wait as long as you can afford to before claiming your benefits, because the longer you wait, the more your benefits will increase. Although, it should be advised that before you play the waiting game, you’ll want to evaluate your individual financial situation and determine which approach makes the most sense for you.
Stick to Your Spending Plan
You’ll want to be truthful and accurate when it comes to your retirement goals, so that you can have an effective discussion with a financial planner to determine the appropriate size of your nest egg. Having a retirement game plan in mind is highly encouraged in order to avoid running out of money as a senior. For instance, the famous 4% rule suggests that if the withdrawals from your investments total 4% or less every year, you will not run out of money in retirement. However, depending on the size of your investments, this percentage rate may need to be adjusted accordingly.
Don’t Forget About Taxes and Inflation
Remember, following the 4% rule does not take taxes into account. So, the money you withdraw from your 401(k) or an IRA account for example, will lose value after taxes are taken out. Additionally, Social Security taxation, healthcare expenses, and Medicare premiums can all affect the amount of taxes you pay. Once again, it’s advised to confer with a financial planner, so you can address all of your retirement tax questions. In addition to taxes, you must also factor inflation into the equation. It’s a basic concept that attests a general increase in prices and fall in the purchasing value of money over time. Therefore, staying ahead of the inflation curve is vital if you wish to maintain financial stability in retirement.Back to all articles