It’s Not Too Late to Plan Your Retirement
“Pick a flight,” my husband grumbled as he looked over my shoulder. “I’ve never seen anyone so slow to pull the trigger on a vacation.”
“Do you want it done fast? Or do you want it done right?” I asked as I compared the layover times for two different flights.
I had a feeling that he wanted to say that he wanted both, but he knew planning a successful, hassle-free vacation didn’t happen quickly. At least not with me.
I planned for delayed flights and problematic connections in busy airports. I closely investigated hotels, planning against poor locations and noisy rooms. I planned events for rainy days and sunny days so that we always had options.
In short, I tried to make sure that I had an answer for nearly any complication that could ruin our vacation.
And so far, I’ve been successful.
While I’m not alone in the type of detailed planning I go through for a vacation, few plan as thoroughly for their retirement … but it’s not too late to start.
Take Steps Now
Americans are horrible planners when it comes to saving and strategizing for our retirement. What’s happening right now is always more important than those “golden years” that seem so far away. There’s always time later … until you’re out of time.
Franklin Templeton Investments reports that 40% of millennials have no retirement strategy in place.
But it’s not just millennials who are unprepared for retirement. The Insured Retirement Institute reports that 54% of baby boomers have no retirement savings, and 82% of baby boomers have underestimated the percentage of their income they will need to pay for health care during retirement.
But what if we planned as thoroughly for retirement as we did for vacations?
And that’s what most of us dream retirement is — one long, glorious vacation.
That’s why I’ve got three steps you can take right now to get your retirement moving in the right direction.
Know Your Budget
Is a million dollars in your retirement savings enough?
Or do you need $2 million? Maybe less?
The first step is to figure out your budget. One of the easiest steps you can take is to simply add up all your expenses over a year. This will include your taxes, gifts, eating out, entertainment, vacation, and the typical wear and tear of your home and car.
It would even be a good idea to add in an extra vacation or two to the expenses since you likely want to travel a little more during retirement.
Once you have this number, divide it by 12 to see your average monthly expenses.
The key is to figure out how much you’re going to need each month.
Most people estimate too little, assuming that if they aren’t working, their expenses are going to drop. But other things such as more entertainment or travel will often make up the difference.
Learn your monthly expenses number now.
Know Your Health Care Costs
You need health care coverage. That shouldn’t come as a surprise at all.
It also shouldn’t come as a surprise that your health care costs are going to rise. As we age, we have more health problems … no matter how healthy we try to be.
The key is to start researching now what your Medicare costs are going to be.
In addition, it’s critical to learn how your potential income distributions could impact your Medicare Part B and D premiums.
But did you know that you can use your health savings account (HSA) as a retirement savings account as well? The unused money from that account can be rolled over year after year and invested tax-free. And when the money is removed from the HSA for a medical expense, there’s no tax!
Health care costs can be added to your monthly expenses number to get a more accurate gauge of how much money you will need each month.
Get a Raise From Washington
And a final key step is to maximize your Social Security payments.
Too many people claim their Social Security benefits at their first opportunity — and for many people, that’s at age 62.
But did you know that if you wait, you can significantly increase what you receive?
I know the scary idea is that the benefits might not be there when you need them, but it truly is best to wait.
You will receive approximately an 8% increase in benefits for every year you put off your Social Security filing beyond your full retirement age, up until age 70.
These are just a few easy steps that you can take right now to put your retirement on the right path.
For more detailed information on enhancing your retirement planning, cutting taxes and improving your investment portfolio, check out The Bauman Letter.
Sr. Managing Editor, Sovereign Investor Daily
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