If you are planning to retire in the near future, financial planning should be a priority for you. Since you will probably not make money post-retirement, the best approach would be to streamline regular income for the years ahead. Ideally, you should seek professional guidance for the same because an expert will be in a better position to guide you about investing your money in the right places. Further, they can assist you in tax savings, wealth management, estate planning and more. Still, you should have ample knowledge at hand before you retire. Here are some guiding tips for those who are going to retire in near future.
Assess your Expenses:
The first feasible step would be to make a comprehensive assessment of your current expenses. Further, you need to create a clear picture of the way you can possibly tweak them post-retirement, considering the changes in your income and circumstances. For instance, your commute expenses might be reduced while you may start spending more on entertainment and hobbies. Think about clearing debts like credit cards and mortgages before retiring because you would not want to bear these expenses as regular ones.
Focus on Creating Income Sources:
Besides prepping up for post-retirement expenses, focus on creating income sources as well. You may have some savings of course, but the investment is what really matters because you will need a regular influx of money. Experts suggest that you should work on turning your assets into reliable income because this translates into financial and emotional independence. You can explore annuities as an option to turn your savings into a predictable income stream.
Prioritize Healthcare Costs while Planning:
Often people tend to pay less attention to healthcare costs because those over 65 years of age are eligible for Medicare. However, there are certain expenses that are not covered, such as vision, dental and long-term care. This is the reason that you need to prioritize the healthcare costs for old age while planning for the period after you get retired. The amount that you need to pay for Medicare is dependent on several factors such as income, type of coverage and late enrollment fee.
Consider Special Circumstances:
Besides the conventional aspects of post-retirement financial planning, there are some special considerations that you need to bear in mind. Families with children or relatives with special needs, for example, need to plan differently to ensure adequate finances for their long term care. Brad Stark from Mission Wealth (https://missionwealth.com) explains that millions of people act as caregivers for a family member with a disability, and often need professional help in ensuring their financial stability.
Have an Social Security Strategy:
Though social security can be availed at the age of 62, the longer you wait the better it is. This is because you can get larger amounts in social security checks if you manage to wait for a few extra years. Since social security is a guarantee of lifelong income, you will be able to enjoy a better and more independent lifestyle even at an older age.
Evaluate Income and Tax Planning:
Another key aspect of retirement planning relates to income and taxes. The sources of incomes of an average retiree are diverse, ranging from the individual retirement account, investment accounts, social security, taxable savings, trust income, and business income. Each of these sources is taxed differently. So as a part of the planning process, you should know these income sources as well as tax structures well enough so that you can maximize the income and minimize the tax burden.
Look at your Home Equity:
Owning a home is always a plus point, more so for retirees as because home equity is the biggest source of wealth for them. You can consider downsizing your home post-retirement as it will give you sufficient funds in the easiest way. Also, chances are that you will need lesser space because your children would probably have moved out for education or to settle with their own families. This means that your home can act as a financial cushion after you retire from your job.
Getting expert advice from a professional financial planner is the best approach because they have the expertise to assess your circumstances and provide an optimal plan well in time. Further, always involve your spouse in any decision you take for the future, whether it is about investing your money or keeping it aside for something that you plan to do once you retire. Planning at this stage should be a collaborative effort as you need to consider their wishes and financial security as well.
