Archive for June 3rd, 2013

Archive for June 3rd, 2013

Many people envision retirement as an idyllic phase of life where there’s no work, just relaxation and a stack of cash in the bank to fund cruises, trips to Florida and an overall easy, leisure class lifestyle. Those dreams can be thwarted by a lack of realistic planning, however. Many people start saving too late, don’t save enough, expect Social Security to be their golden cushion or completely underestimate how much they need to live in retirement. Shifting from a wage-supported life to a fixed income can be difficult since inflation and cost of living are not fixed factors. On the flip side, the well-informed retiree who prepares for obstacles years in advance can truly enjoy a carefree, post-work life.

Here are 10 important pieces of information that can make retirement as fulfilling as possible.

1. Unless you’re thrifty, the myth that you can survive on 70 percent of your pre-retirement monthly income is misleading. Financial advisors estimate that people need at least 80 percent of their former income to make it in retirement. The reason is that modern retirees are in better health and participate in more activities than prior generations.

2. If you planned to quit your job at 65 like your parents and grandparents did, you might forfeit some of your social security. The retirement age at which a person can receive full benefits is 67 for anyone born after 1960; those who collect social security prior to that age will be penalized with reduced benefits.

3. Monthly social security checks are based on wages earned during the 35 most lucrative years of your career. If you’re widowed and your spouse earned more income over their lifetime than you and is entitled to benefits that exceed yours, you can elect to collect the spouse’s benefits instead.

4. Annual checks from social security usually tally no more than $11,000 for the average person, according to the financial website The Motley Fool. This means retirees must have several other financial streams of income to survive. Those streams should include savings, stocks, bonds pensions, and other investments, such as real estate.

5. When it comes to retirement savings, nothing is more valuable time. The earlier you start investing the more you’ll reap in accumulated interest. It’s the interest over time that’s important — not how much you contribute. You don’t even have to contribute to savings for your entire working career. Even if you only invest for 10 or 15 years of your career and then let the money sit and accrue interest for decades until you retire, you’ll have significantly more if you begin at 30 than if you launch a desperate last minute nest-building attempt with double contributions at age 45 or 50. Investing late in life simply does not give you the time to reap enough interest. The best thing to do is to start contributing to your retirement investment portfolio in your mid-20s. However, if you did not plan adequately, simply start right now. Waiting any longer is like throwing away years of free money in the form of interest.

6. Yes, you’ll still have to pay taxes on income in retirement, most notably on funds from 401(k)s and IRA accounts. However, if you move to a no-income tax state like Texas, Alaska or Nevada, you can protect your personal income from state taxes. Also, remember if you own a home, you may still have to pay property taxes in retirement, although some states give seniors reduced property tax bills.

7. Don’t make your retirement plans solely about money. Seniors who retire with no thought for how to make their days worthwhile, often feel useless and unhappy. Make a list of great adventures you’d like to embark on during retirement: places to visit, challenges to undertake or places to volunteer.

8. Make a list of social groups to join during retirement. Of all the things seniors complain about, the lack of social contact and someone to talk to or eat with are among the top concerns. Your spouse might not always be with you and neither might your children. Start building social networks early through churches, charities, recreation centers and professional groups. Ensure you have ways to meet new friends throughout retirement.

9. Have contingency plans for if you are in failing health. You might need to live in a nursing home or assisted living facility. It’s best to consider ahead of time what specific venue is appealing to you. Discuss these plans ahead of time with family.

10. Develop talents or hobbies that will allow you to work part-time in your retirement years. This can supplement your income and give you a way to feel useful and an active part of society.

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Author Bio: Julia Dennis writes about Eco Friendly senior living facilities and other assisted living topics for Friendship Village. When she’s not writing she enjoys running and spending time with her children.