Authors Bio – Today Marie Nelson will be writing a post for us. Marie is passionate about personal finance, and is going to share a retirement related post with us.
Life has been divided into 3 stages and the last stage is retirement. A new lifestyle waits post retirement. This transition would not only affect you but also have a remarkable impact on the people associated with you. If you are not prepared for retirement then it might affect you and your family adversely. But this article would share few tips that would help you have a post retirement life without any financial hardship.
Before you retire keep the following thing in mind:
1)Â Â Prepare a post retirement budget:
Other than your professional work clothes or transportation to the office your other expenses would remain same. But your income might be less than before so it would be advisable to prepare a budget plan according to your standard of living. Your expenses would not go down post retirement so maintaining a budget would save you from incurring debt. So plan your future that it does not take a toll on your pocket.
2)Â Â Observe your cash flow:
There are several sources for the retirees to draw their income for instance Social Security, pensions, investments and, increasingly, part-time jobs. Before you retire you need to scrutinize your source of income so that you can avoid financial doldrums and can pave a smooth post retirement life. Ensure you have source to pay all of your monthly bills. Retirement income such as home equity, annuities, insurance, royalties and rental income are not that popular among the retirees.
3) Reduce your taxes:
When you put your money in retirement investment plans like 401k and traditional IRAs it is not considered taxable income till the cash is withdrawn. As tax bracket fluctuates year after year so in order to minimize taxes withdraw the cash after you have researched on the market. When you find tax brackets are lower than either you withdraw it or it to a Roth IRA plan. And when the tax bracket is higher on the graph then withdraw a fraction of the amount.
4) Increase Social Security:
Retirees should sign up for Social Security before they retire in order to secure their future. As a certain percentage of your paycheck is directly deposited into the social security fund you can easily reap the benefit from it. Try to avoid claiming it before you turn 70 years as the payments is increasing per annum. Higher return can be expected if you delay your claim it would save you from the financial crisis at the time of your old age.
5) Plan for a long term goal:
Retirees need to do a long-term planning as they might not have any other source of income and they might come across uncertain emergencies. Medicare pays for nursing up to 100days but if you are struck by some chronic disease then you might require longer period of time to cure. In this case hefty amount of cash would be drained out from your savings account making you penny less. Look for a long-term-care insurance policy in order to protect yourself from high chronic care costs.
6) Maintain the emergency fund:
Maintaining an emergency fund is crucial at any stage of your life. This is because you never know when you require cash to mend the leaky roofs, repair the cars, and other large uncertain expenses. Make sure that you keep the emergency fund in FDIC-insured account or invest it in some profitable fund. FDIC insured account would allow you to delay withdrawal from investment accounts when the stock market would be down.
7) Existing debts needs to be paid off:
Before you retire make sure to pay off your entire debts. As these are liabilities and you would never want to carry the burden of debt post retirement. Calculate the total amount of debt you owe and then start paying the debt with high interest rate. By the time you retire you can unshackle yourself from the clutches of debt.
8 ) Synchronize with your spouse:
Retirement would bring a new change in your life and this change might have an impact on your marital relationship. One of the spouses decides to retire then the other spouse may continue with his job. You can divide the financial responsibilities if both of retire together. In this way you can achieve financially secured future even after your retirement.
Planning for child education, child marriage is a another aspect which one must consider before retirement. And SIP in equity mutual funds is the best solution for this
Also estate planning is crucial ! You have mentioned about Long term care insurance in India. It has not yet been launched by any major company, but then there is tremendous potential given the ageing Indian population. Literally we are sitting on a demographic timebomb waiting to explode!
Talking it out and syncing the decision with the spouse is something I never thought of, but as I think about it I wonder how I missed such an important thing! Not only will the relationship decide how the money is spent during retirement, it will also impact the sacrifices to be made today, and the lifestyle choices that have to be made in the present.