Transitioning Into Retirement: Your Plan A And Plan B

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There are so many books, articles, podcasts and shows about retirement planning that it can seem overwhelming to you. With so much information available to you, it is possible to lose sight of your overall strategy and not see the forest for the trees. To help you focus on the most important decisions, you’ll want to create a realistic retirement plan that can guide you to a financially secure retirement.

The first step is to complete your retirement homework. This homework involves thinking about your goals for retirement, including when you want to retire. Homework also includes budgeting your living expenses in retirement and taking an inventory of your financial resources.

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more from forbesDon’t forget to do your retirement homework

Once you’ve done your homework, you’re ready to make your financial plans for retirement. Keep in mind that this can take a lot of time and effort, but it is okay, considering what is at stake.

Your Retirement Financial Plan A

It is important to determine whether your retirement income will be sufficient to cover the estimated living expenses developed from your retirement homework.

The first step is to estimate how much retirement income you can expect from Social Security at the age at which you want to retire. Be sure to include income from your spouse or partner, if applicable.

It’s important to note here that most experts advocate delaying starting your Social Security benefits for as long as possible, but not after age 70. Delaying your Social Security benefits helps you maximize the portion of your retirement income that is protected from inflation and stock market crashes.

As a result, if you plan to delay starting your Social Security income after the age at which you want to retire, you will want to develop a strategy to replace the Social Security income you delay. are doing.

more from forbesBoost Your Risk-Protected Retirement Income With Social Security Bridge Payments

The next step is to decide how you will deploy your retirement savings to generate lifetime retirement income. You have a few options, each of which has its own advantages and disadvantages:

  • Use a portion of your savings for a Social Security bridge strategy, which is a way to help optimize your Social Security benefits.
  • Invest your savings and use a systematic withdrawal strategy to regularly withdraw a fixed amount from your savings. You can withdraw the principal, interest and dividend income, or live only on the interest and dividend income instead.
  • Buy an annuity from an insurance company that will pay you monthly retirement income for the rest of your life.

Your job is to learn the pros and cons of each approach and then estimate how much total retirement income you can generate from your retirement savings.

Finally, if you’re eligible for a traditional pension, you’ll want to estimate the regular income you can expect to receive. Most pension plans have online calculators that will help you estimate your retirement benefits.

You are now ready to add up all sources of regular retirement income to determine whether you can cover your projected living expenses and have a comfortable margin for unforeseen events.

If your retirement income covers your expected living expenses, you may be comfortable concluding that you can retire whenever you want. But if your income doesn’t cover your projected living expenses, you’ll have to move on…

Your Retirement Financial Plan B

Plan B involves exploring alternative strategies you can use to increase your projected retirement income, reduce your living expenses, or some combination of the two. Here are some possible strategies:

  • Delay your retirement age. This allows your savings to grow with investment income and can also increase your Social Security benefit.
  • If you delay retirement until age 65, when you are eligible for Medicare, you can significantly reduce the amount you pay for medical insurance.
  • Work part time for some time to generate extra income.
  • Reduce your living expenses. For most retirees, housing represents their biggest living expense, so moving to a less expensive area or home can cut your living expenses significantly. You can also consider reducing your transportation expenses by owning a less expensive car or using public transportation.
  • Deploy the equity of your home. If you have enough home equity, you can sell your home, get a profit, and use the money to increase the portion of your retirement savings that can generate retirement income. Another possibility is to use a reverse mortgage, which will increase your cash flow that will help pay for your living expenses.

For most people, these strategies are the most important levers you can pull to balance your income and living expenses. Of course, there may be other ways to improve your retirement finances, and for those, you’ll need to do a little more homework.

Once you’ve mastered the basics of your retirement financial plans A and B, it’s a good idea to move on to a more advanced plan. This includes considering how you will protect yourself in your later years when you may be vulnerable and need help with daily living. You’ll want to determine how you can pay for the help you need and what strategies you’ll want to adopt to prevent your finances from falling victim to any mistakes or frauds you make.

more from forbesThink ahead to keep your money safe as you age

If you haven’t done this thorough retirement planning yet, it’s time to make it a priority. You and your family will thank you for this.

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