Retiring? Make Sure Your Retirement Plan Suits Your New Life
When drafting a retirement plan, your plan should always be unique. Whether you are looking to retire in the coming years, or further down the road, your plan should suit your specific wants and desires. Visualize what you would most enjoy in your retirement, and begin planning, saving and consulting professionals such as those at Fiduciam Wealth Management to streamline the process. Here, the financial planning team at Fiduciam Wealth Management provides a few tips to ensure your retirement plans are catered to your desired lifestyle.
Determine How Much Money You Need to Live Comfortably
Somewhat self-explanatory, the first step in ensuring your retirement plan is completed is figuring out how much money you will need to live comfortably. This number will vary based on the expenses you currently have, are likely to incur and the expenses of leisure activities and housing after your retirement. If you expect to spend your time traveling or discovering new hobbies, your projected costs may even be higher than what you are paying now. When estimating your retirement cost, it is also wise to consider future medical costs with your approximation. If you retire at 65 years of age or older, Medicare will cover the majority of your routine health care costs, but you may want to consider supplemental coverage to help pay for non-routine health care expenses, which are likely to rise as you get older. Allocating money for both leisure activities and potential health concerns is important in creating a cohesive retirement plan that you feel comfortable with.
Make Paying Off Debt a Priority
The longer you wait to pay off debt, the more it will impede your retirement savings goal. You are likely to find that a majority of your income currently is devoted to paying interest on your debts, such as car payments or mortgages, and may feel you cannot afford to save. If you have high-interest credit card debt or overwhelming student loans, it is important to create an actionable plan to alleviate this debt in order to have some sense of financial independence. While paying off debt can feel overwhelming, seeking out resources to handle your debt proactively may cause short-term frustration, but will ultimately lead to comfort and relief in financial freedom. In the same respect, the longer you have until retirement, the more you should focus on paying down debt. If you’re looking at retiring at 65, and you are in your 20s or 30s, it may be smarter to pay off high-interest debt before additional fees make payments feel unbearable.
Consider How Social Security Fits in Your Retirement Plan
When outlining your retirement plan, it is important not to overlook how Social Security fits in. Decide if you would prefer to get benefits early in a smaller monthly amount over a longer period of time, or wait for a larger monthly sum in a shorter time frame. The earliest you are able to collect Social Security or spousal benefits is age 62, but the longer you wait, the more money you’ll generally get. For example, if you are a middle-income earner hoping to have 80–100% of your pre-retirement income, you can plan to collect about 40% of that income from Social Security. If you take Social Security before your full retirement age, currently 67, and you are working and receiving benefits, there are limits on how much income you can make. Additionally, consider if you plan on working during your retirement and if you have other sources of retirement income. What you should do depends on several personal factors, such as your cash needs, health and ideal retirement plans.
Make Saving and Investing a Priority
As a rule of thumb, 10-15% of your income should be set aside for your retirement, starting in your early 20s. If you are starting to save later in life, you may need to increase this percentage in order to retire at your desired age. If designating additional savings and investments is not possible right now, do not stress. The most important part of financial planning is being proactive with whatever income you currently have. Consider saving what you can and commit to increasing 1% every year until you can hit your goal. There are many options for saving and investing, including:
- company-sponsored retirement plans like a 401(k), 403(b), or a Thrift Savings Plan,
- Individual Retirement Accounts (IRAs),
- Roth IRAs,
- a variety of investments like mutual funds, stocks and bonds,
- and life insurance that builds cash value.
Make Saving and Investing a Priority
When preparing for retirement, it is important to take the necessary steps to ensure your plan gets you to your ideal financial and lifestyle goals. At Fiduciam Wealth Planning, we work with our clients to establish a unique and beneficial financial plan, evaluate the client’s current financial status and help them make the best decisions for their retirement. To learn more about how Fiduciam Wealth Planning can help you, contact our Towson office today.