5 Concerns In Retirement Planning
Retirement has the potential to be what you have prepared it to be. Inevitably it brings a new set of challenges that need to be addressed and dealt with. By laying down a solid financial plan now, you can ensure a smooth transition to retirement which will set up the standard of living envisioned. Here are the 5 big financial concerns people should be aware of when looking at their retirement.
1. Health Care Cost And How To Pay For Them
Health care costs are one of the the top retirement concern for Americans. Most people are worried their medical expenses will be too high, but very few of those people nearing retirement age have estimated how much they will spend on health care in retirement. Unanticipated medical expenses and costs can derail years of retirement preparation. Plan now for the cost of health care later so you do not get blindsided by the event and the costs associated.
2. Being Able to Save Enough Money
Estimates show 25 percent of all 65-year-old’s will live to age 90, according to the Social Security Administration, so outliving someone’s money is a real possibility that needs to be evaluated to make sure the savings will be enough to last the lifetime.
By estimating how much you need to save to cover a long retirement it is easier to forecast and implement a plan of action. To find out if you’re on track, use a retirement calculator. Then look for ways to boost your savings, including taking advantage of catch-up contributions to retirement accounts and adjusting your asset allocation to meet any changing circumstances.
3. Creating Income Streams
Most Americans are worried that they won’t be able to afford daily expenses in retirement, and they’re concerned that Social Security income either won’t be available at all or won’t cover enough of their expenses. When it comes to income planning in retirement, keep in mind that working for even just a few more years may help you suspend drawing income from Social Security and savings while taking advantage of available pensions and benefits. Also, view retirement as not the end all to income but an adjustment of income and earning possibilities.
4. Getting Rid Of Debt
Americans worry about having too much debt in retirement. The average 65-year-old had more than $48,000 in debt in 2017, compared to less than $34,000 in 2003. During this time frame, debt increased by about 60 percent for all borrowers between 50 and 80 years old. There are different ways to tackle debt and many strategies for paying it off. If debt feels overwhelming do not just ignore the problem, tackle it head on. During the working years when you eliminate debt you essentially give yourself a raise and that money can be put to work. During the retirement years, eliminating debt increases your standard of living as that money is no longer allocated to serving the debt.
5. Knowing The Retirement Tax Situation
You will still continue to pay taxes in retirement. Taxes are calculated on your income each year as you receive it, much like how it works before you retire. It’s important to estimate the amount of taxes you’ll pay in retirement so you can budget for it.
Each type of income you receive will have different tax rules that apply to it. To estimate and minimize your taxes in retirement, you need to know how each income source shows up on your tax return. The six most common types of retirement income that are taxed are: social security income, IRA and 401k withdrawals, pension, annuity distributions, investment income and gains from the sale of a house.