7 Top Retirement Tips for every age
Under Age 50
1. Imagine yourself older and retired
There’s no way you can plan for your retirement unless you know what’s in store for you. It’s never too soon to start thinking about your retirement lifestyle and what you want to do after you’re done working. Unless you have other plans for yourself: Maybe you want to start your own venture? Or do you want to travel or go for a pilgrimage?
If saving for retirement is the last thing on your mind, it shouldn’t be. Even if you think your goals might shift in the years ahead, dreaming about them today gets the conversation started and helps you plan.
2. Start saving for retirement early
Once you have figured out what you want to do in your later years, it’s time to find out how much you need to do it. Even if you have $0 saved at the moment, the key is to start saving something – anything. Let’s say you’re 35 years old, earn $100,000 a year and have $200,000 in your 401(k). You might determine you need $2 million saved up by the time you’re 65. To get there, you’d need to invest $550 per month and earn a 7% annual rate of return.
3. Save money at every step
Saving as much money as you can, for as long as you can, is the key. If your company offers a 401(k) match program, consider maximizing your contribution to receive the full company match. Unfortunately, many people miss out on this free money.
Aim to save at least 15% of your gross pay. Not there yet? Increase your retirement savings contribution with every pay raise before you get too used to that higher paycheck.
4. Saving outside of work through an IRA
Consider opening a Roth IRA. A popular benefit of the Roth IRA is that there is no required withdrawal date. You can actually leave your money in the Roth IRA to let it grow and compound tax-free indefinitely. What’s more, any money you do choose to withdraw is tax-free.
You can also go for a traditional IRA, which can help you further broaden your retirement savings plan and let you control your investment selections. IRAs can give you access to investment options you don’t have at work, such as municipal bonds, real estate investments, commodities, and emerging market funds.
5. Allocate assets wisely
The best asset allocation strategy for retirees isn’t a one-size-fits-all formula. There are several variables that determine your ideal stock/bond/cash allocation, such as your age, risk tolerance, and more. Spreading your investments across various sectors and asset types can help soften the effects of big market fluctuations so you can worry less.
Putting fixed amounts into investments on a regular basis, regardless of market conditions can also help. And rebalancing your portfolio can make it possible to lower your exposure to investments that have recently outperformed the market while increasing exposure to those that may be ready to grow. These strategies can be tricky, so make sure you ask your advisor for help.
6. Say ‘no’ too emotional investing
Emotion is the enemy of investing. When markets perform well, we tend to become euphoric and pour money into stocks. When markets turn down, our emotions change and can cause us to pull out of the stock market just as it reaches it’s low and misses out on potential gains as it rises again. The lesson: emotions can cause us to do just the opposite of what we should do.
7. Consider insurance and leave your worries behind
Even if you build a smart saving and investing strategy, unexpected events can occur. You could experience an illness that prevents you from working and earning an income. Or your home could be damaged in a storm. You need to save for the rainy days in your life. Your advisor can help evaluate your personal situation and line up the right levels of protection, whether it’s disability income insurance, long-term care coverage or auto, home, and life policies. With sufficient protection, you can focus on the fun parts of planning for the future without having to worry as much about all the “what ifs” along the way.
Age 50-64
1. Make out a bucket list
Most of us have plans and goals throughout our lives, but work has a way of forcing us to delay accomplishing them. Once you’re retired, the work and time factors are no longer an issue. That means now is the time to do all of those things that you wanted to do all of your life but simply didn’t have the time.
This is why it’s so important to make out a bucket list. A bucket list is simply a list of things that you hope to do or accomplish in your life. Get in touch with your advisor and get specific on what that will look like. Now that you’re a little bit closer to retirement, you can start thinking tactically to ensure your dreams and goals become your retirement reality.
2. Become a penny hoarder
Saving every single penny that you can be a top priority as you near retirement. Make sure you’re maxing out contributions to your retirement accounts as much as you can, including making any available “catch-up” contributions to your 401(k) and IRA. If you’re between 50 and 64 years old, you may be able to tuck away extra 401(k) catch-up money to help you meet your retirement goals.
3. Consolidate retirement funds
Over a period of decades, investment accounts can become over-allocated to too many different stocks and investment funds. The holdings in these funds often overlap each other and don’t further diversify your portfolio. Retirement is a good time to consolidate funds to simplify your investments. Proper diversification can be accomplished with fewer funds and lower fees.
You can decrease the number of funds you own without sacrificing returns or diversification by allocating your portfolio to broadly represented stock and bond index funds. These funds are made up of thousands of holdings and are managed passively by tracking an index instead of having managers select the funds. A byproduct of switching to passively managed funds is the fees are usually much lower than actively managed funds. Fewer funds in your portfolio require less of your attention.
4. Mind your health
Health care is one of the largest expenses for many retirees. Unfortunately, many people greatly underestimate how much they will need to cover out-of-pocket health care costs throughout retirement.
According to an annual estimate by Fidelity released in April 2018, the average couple retiring at age 65 will need $280,000 for health care and medical costs, according to Time. Keep in mind that while Medicare is a solid foundation for health care costs, it doesn’t cover everything, like routine services such as dental care, dentures, vision and hearing care, and long-term care. If you don’t know how health care expenses could affect your retirement or whether you’re saving enough for your future needs, talk to a financial professional.
5. Build a retirement “paycheck”
Talk to your advisor about the income you’ll need during 30-plus years of retirement, and ask whether you should start planning for it now. Some strategies to consider include getting an annuity that provides a steady income stream throughout your lifetime or adjusting your investments.
6. Don’t ignore long-term care
About 70% of Americans who reach age 65 will need long-term care at some point, according to the Department of Health and Human Services.
Our final years can be expensive. Nursing homes cost a fortune. While you’re in your 50s and early 60s, consider purchasing coverage that could pay for the cost of a lengthy stay in a nursing facility or in-home care. It’s typically better to lock in premiums while you’re younger.
7.Re-evaluate how you invest
Priorities change over the years, and you need to start focusing on preserving your wealth as much as growing it. How you invested when you were 40 may not be how you should invest at 50 or 60. Meet your financial advisor and work out a complete strategy to help you feel more confident about living the life you want in retirement.
Age 65+
1. Review your retirement goals
Continue to meet with your financial advisor to review your retirement goals and assess your position. Your advisor can help you make adjustments, if needed, to align with your retirement needs.
2. Control your spending
The modus operandi for withdrawing money from retirement savings is to only take out up to 4% each year. Of course, unexpected expenses can throw a wrench into the best-laid plans. You can seek help from your financial advisor to establish a spending plan and withdrawal rate tailored to your needs.
3. Don’t get burned on taxes
How you withdraw from your various taxable and tax-deferred accounts in retirement — and which you tap first, second and so on — determines the taxes you owe and helps to make sure your money lives as long as you do. It’s generally best to tap taxable savings before tax-advantaged retirement accounts — especially with tax rates potentially on the rise. But everyone is different and there can be tax benefits to tapping several different types of retirement savings accounts at the same time.
4. Make your retirement savings last
Retirees often make a common mistake of shifting a big portion of their assets to cash and fixed-income investments. While you should consider investing more conservatively as you age — since you have less time to recover from market downturns — you don’t want your investment portfolio to become so risk-averse that it’s gobbled up by inflation. Remember, retirement can last more than 30 years, so it’s important to ensure your retirement savings last. Work with your advisor to make sure you plan for your nest egg to keep growing and last as long as you need it.
5. Convert your savings to income
Research your income options and set up a plan so you have an income from the first day you retire. Options include RRIFs, annuities and unsheltered savings. You may want to speak with a financial advisor to help you set a plan to meet your income needs in retirement. It may also be a good time to review your investment goals and make any adjustments to your investments.
6. Brace yourselves for the long run
Planning for your later years is crucial. People usually only plan for their early retirement years, when they can travel the world or partake in their favorite activities. But those activities may not be realistic when you’re 80, 90 or 100. Your advisor can help you think through how you hope to spend your later retirement years and work through some possible scenarios. Then you can take steps to be more prepared, such as securing long-term care coverage to help pay for any services you may need or setting up an annuity to protect your retirement income.
7. Keep a check on your goals and finances
Leaving your retirement on autopilot can wreak havoc to your financial goals. As you grow older, your insurance needs will likely change. Make the best decision by anticipating what will work for you financially and bring you joy in the decades to come.
Well, this was too much to take, wasn’t it? But you don’t have to worry as long as you rely on PTIC India for all your retirement planning. Just call us today and our agents will take care of the rest. With PTIC India, retirement would be the last thing to worry about.
