Never Too Early Or Late To Begin Retirement Planning
Retirement planning includes evaluating income sources, estimating expenses, implementing a savings program and managing assets in a way that ensures a future cash flow that will meet your retirement needs. Ideally, retirement planning begins with your first paycheck. That being said, it is difficult to imagine a sixteen year old saving with retirement in mind. However, the habit of saving begins the process.
Certain professions, such as police officers, fire fighters and military personnel can retire as early as fifty-five with full pensions and health care benefits. However, for most people, an early retirement requires significant planning and sacrifice. If you plan to retire early, at what age you retire depends on many factors.
Social Security defines sixty-two as early retirement. However, you will receive reduced benefits. You might consider an early retirement but delay receiving benefits until a later date, as late as your seventieth birthday. This means penalties do not incur. To go this route, at the beginning of your retirement you would depend on your personal assets.
Funding an early retirement is no easy task. You may be able to draw on your 401(k) without penalty, but there are specific rules that must be followed. If you are one of the decreasingly fortunate few with a company pension plan, you may not be able to access that plan until you reach a certain age. Another factor to consider is health care. Medicare coverage does not start until sixty-five. As you age, private health insurance becomes more expensive.
Your normal retirement age depends on the year you were born. The amount of social security you receive is based on your earning history and the age you begin drawing from the fund. Currently, baby boomers who retire at their natural retirement age are sixty-six years old.
If you are five years away from retiring, there are a few steps that you ought to take. Put sufficient funds into a savings, check or money market to cover you for a few months, just in case there are delays with your first social security payment, or glitches in your 401(k) withdrawal plan.
Fine tune your retirement income versus expenses, and beginning living as if you are already retired. If you discover you cannot live on what will be your retirement income, you have to make some decisions, and make them fast. You can spend less, save more, or work past your natural retirement date.
Upon retirement, you will be in a lower tax bracket. Look for ways to maximize tax deductible contributions. If you are selling your home, you could receive a tax write off of up to $500,000 as a married couple, and $250,000 if you are single. If you own company stock, when you sell, taxes need to be paid. It may be possible to spread taxes that need to be paid over several years.
The investment risks you take before retirement may have paid off over the years. However, when retired, the up and down nature of higher risk investment accounts may no longer be palatable. When nearing retirement, it is time to put your investment accounts into what are perhaps lower interest earning, but safer investment areas. Know how much money you have and how long it will last.
People are living longer and healthier lives. If you retire before or at your normal retirement age, there is a good chance that you still have a lot of living to do. You may need to find work out of financial necessity or you may want to work simply to remain active and involved. Whether you want to work or have to work, there are ways to earn extra income.
Retirement planning means more than making sure you are in a financially sound position. It also means evaluating how you want to spend the rest of your life. If continuing to work is a necessity, perhaps a part-time job will suffice. Another option may be to take on seasonal work.
Many retirees start new careers as consultants, having gained a great deal of experience within the field they were employed in for many years. Another option is to turn a hobby into a profitable venture. It is time to redefine how you use your time as well as your money.