If you’re retired, your number one concern shouldn’t be your
retirement savings. Your time should be spent doing the things you
were too busy to do before
– landscaping your yard, having the grandkids over for the
weekend or just plain relaxing.
If you’re retired, your number one concern shouldn’t be your retirement savings. Your time should be spent doing the things you were too busy to do before – landscaping your yard, having the grandkids over for the weekend or just plain relaxing. If you’re retired, you should already have a set retirement plan, right? Well, you know as well as I do, that answer is not always yes!
If you’re one of the many procrastinators of the world, you may not have put much thought into retirement until you were ready to retire. The good news is, whether you are 45 years old or 65 years old, it’s still possible to get the most out of your retirement savings. The following are guidelines that can help you get on the steady income track.
One: Maintain a Long-term Perspective – Because of medical breakthroughs, many Americans can expect to live well into their 80s and beyond – that’s the good news. The challenge is making your money last your lifetime. Unfortunately, treasury rates are near 40-year lows, and the interest on CDs and money market accounts may not provide the growth you need. Stocks can provide growth, but risk is a factor you may not want to deal with.
There are other alternatives, such as fixed annuities, that offer growth without the risk of principal due to market downturn. The best part is, when the market rises you participate in the gain, but when it declines you don’t lose any of the principal. And earnings are not taxable until you actually withdraw them.
Two: Create a Lifelong Stream of Income – The two streams most people know about are Social Security and pensions. These are essential and if you’re unsure of your benefits, you should talk with your employer or pension representative. Fifty years ago, these two streams of income might have been enough for a retiree to depend on. Today, you need more. With the age requirements of Social Security benefits getting older and 401(k) plans replacing traditional pensions, retirees need other outlets they can depend on. Annuities are a versatile option. You may receive income for a set term, the remainder of your life or the remainder of your life plus that of a spouse.
Three: Reduce Your Income Tax Hit – Many people embarked on their retirement journey with the assumption their Social Security benefits wouldn’t be taxed. Due to passed legislation of 1983 and 1993, this is no longer true. Today, according to IRS Publication 915, as much as 85 percent of your benefit check might be subject to taxation if you have too much current income. Fortunately, there’s a way to reduce your taxable income using deferred annuities. These annuities accumulate free from current taxation until you withdraw them.
Four: Avoid the High Price of Procrastination – “Why do today what you can put off until tomorrow?” This phrase normally produces a little chuckle, but not when it comes to finances. Taking action now could mean earning more, paying less in taxes and preserving future wealth. The following is a list of actions you should take to ensure your financial well-being and that of your family:
1. Determine your goals
2. Identify your challenges
3. Create a plan
4. Put the plan in action
5. Follow-up to track progress
6. Make adjustments as necessary
If you are unsure of any of the actions listed above, consult a professional you can trust. He or she should be able to give you advice based on your personal situation. But remember guideline four: put a plan into action and don’t wait! It’s your money. Make it last.
Eric Heckman is president of Heckman Financial & Ins. Contact him at www.WealthCreator.com or 297-9800.
