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CHARACTERISTIC – Retirement can mean many different things to many people.
For some, it will be time to travel and spend time with family. For others, it will be time to start a new business or start a charity. Whichever approach you intend to take, here are nine things about retirement that might surprise you.
No age restrictions on when you can retire
In the past, most people retired around age 65. However, retiring later in life has become more common in recent years. In fact, there is no age limit on when you can retire. As long as you have the financial means to do so, you can retire at any age.
Retirement income may be taxable
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Depending on your type of retirement account, you may have to pay taxes on your retirement income. If you have a traditional IRA, you may have to pay taxes on the money you withdraw in retirement depending on your overall income. If you have a Roth IRA, you won’t owe any tax on the money you withdraw.
You may need to adjust your withdrawal rate
The 65+ population is the fastest growing age group in the United States and has grown 34.2% over the past decade. The percentage of money you can safely withdraw from your retirement account each year depends on several factors, including the size of your nest egg and how long you’ll live. However, as a general rule, you should not withdraw more than 4% of your savings each year.
Think about delaying your Social Security
You will receive a reduced benefit if you start collecting Social Security benefits at age 62. For example, suppose your full retirement age is 67 and you start collecting benefits at age 62. In this case, you will only receive 70% of your monthly benefit. If you wait until age 70 to start collecting, you will receive 132% of your monthly benefit.
The average Social Security retirement benefit is $1,536 a month, or about $19,000 a year. The maximum possible Social Security benefit for someone retiring at full retirement age in 2020 is $3,345 per month or $39,000 per year.
Don’t forget the cost of nursing homes.
Most health insurance plans don’t cover the cost of long-term care, such as the cost of a nursing home. Consider purchasing a long-term care insurance policy or setting aside funds to cover future care costs. The average cost of nursing home nursing in the United States is expected to be over $8,000 per month by 2023. However, actual costs will vary by state.
You may need to downsize your home
If you’re considering downsizing your home in retirement, you might be surprised to learn that the cost of living in some areas is quite high. For example, the cost of living in Manhattan is more than double the national average. As a result, you may need to downsize your home to a smaller apartment or condo.
Consider working in retirement
If you haven’t saved enough for retirement, you may need to work in retirement. In fact, about 1 in 4 Americans over the age of 65 are still working. Working in retirement can help supplement your income and keep you active.
You may need to save more than you think
The amount of money you need to save for your retirement depends on a number of factors, including your lifestyle and how long you will live. However, as a general rule, you should aim to have at least 10 times your annual income saved in retirement. For example, if you earn $50,000 a year, you should aim to save at least $500,000 in retirement.
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Don’t Forget Inflation
Inflation will have a significant impact on your retirement savings. For example, if inflation is 3%, the cost of living will be 33% higher after 10 years. Therefore, you will need to save more money for your retirement than you think.
The future leads us to one conclusion: the 65+ age group is set to become larger and more influential. Have you made arrangements for health expenses? Are you comfortable with your decisions? Have you thought about market volatility? Inflation?
Research shows that the average American has $95,776 saved for retirement and 1 in 3 Americans have no retirement savings. Suppose you don’t have enough savings for your retirement. In that case, you should consider working in retirement, downsizing your home, or delaying your Social Security benefits.
You should also be aware of potential nursing and long-term care costs. Finally, remember that you may need to adjust your withdrawal rate as you get older. With careful planning, you can ensure a comfortable retirement.
A retirement strategy is not a “set it and forget it” proposition. You should review your strategy every year to make sure you’re on track to meet your goals. How did you prepare for your retirement? Are you on track to achieve your goals? Have you even set your goals? Take a few minutes and do a personal assessment.
Copyright © Lyle Boss, all rights reserved.