Today, the average American retires between age 62 and 65, with most people leaving the workforce at 63. If you\u2019re nearing your mid-to-late 50\u2019s, you may be starting to seriously consider when to retire and what steps you\u2019ll need to take now to ensure you\u2019re financially prepared when you do retire. In fact, the steps you take in the final decade leading up to your retirement are crucial to set yourself up for success. Today\u2019s post shares three tips to help you prepare to transition into retirement.<\/p>\n
1. Understand how much you will need to save.\u00a0<\/strong>Will you have enough savings to maintain your current lifestyle in retirement?\u00a0<\/em>This is one of the most important considerations to answer before retiring. For many the goal is to maintain the same lifestyle during retirement, others may wish to live more lavishly. Understanding your goals can help clarify if your savings will meet these needs.<\/p>\n Typically, we advise our clients to plan to replace 80% of their pre-retirement income through savings, investments, and Social Security. For example, if you currently make $75,000 a year, you\u2019ll want to be able to draw at least $60,000 (80% of $75,000) annually from retirement. If you plan to retire at 63, with a general life expectancy of 25 years post retirement, you\u2019d need to save approximately $1.5 million. This number will certainly vary person-to-person based on a number of factors like spending, inflation, healthcare costs, etc. It\u2019s a good bench point, however, to help you determine if your current savings and investments set you up for retirement.<\/p>\n 2. Evaluate your investment and savings strategies.\u00a0<\/strong>Additionally, it\u2019s important to utilize current tools to help you reach your retirement goals more successfully. For example, we all know the earlier you save and the more you save, the better off you\u2019ll be in the long term. This is primarily because of the powers of compound interest. If you\u2019re in your 50\u2019s and need to do catch up work, you\u2019ll need to save significantly more each year. Utilize tools like contributing additional income to your 401(k) or IRA \u2013 those 50 and older can contribute $6,000 and $1,000 more per year respectively than those younger than 50. If your company allows for 401(k) matching be sure to maximize savings by utilizing this tool. Money contributed to a 401(k) lowers your taxable income for the year and allows the investment to grow tax-free until it\u2019s withdrawn.<\/p>\n Additionally, it\u2019s important to consider whether or not Social Security will be available as previously considered. For those retiring in the next decade or so, you\u2019re likely covered. The Social Security fund is estimated to be depleted in 2029. That is to say after this time, Social Security will only be able to pay about 70% of previously expected payouts to retirees. This is because the fund\u2019s expenses currently outweigh revenue brought in through payroll and income taxes. Unless legislation changes how the Social Security program currently operates, retirees should strongly consider how much Social Security they\u2019ll actually get when they retire.<\/p>\n Be sure to meet with your TrueNorth Wealth advisor to discuss when to access investments like mutual funds, stock options, and other savings accounts.<\/p>\n 3. When will your spouse retire?\u00a0<\/strong>As of 2012, nearly 60% of all households consisted of dual income households. If both you and your spouse work outside the home, consider staggering retirement to maximize withdrawal amounts. For example, if one spouse waits to retire just a few years after the other, you can both continue contributing to savings accounts and delay pulling Social Security. Doing so boosts the amount you\u2019re able to withdraw significantly. Each year you wait to withdraw Social Security, the amount you\u2019re allowed to withdraw increases. The longer one of you works the more time and interest can work to grow your savings. Additionally, the ability to maintain employer-sponsored health insurance can save a couple significantly. Especially as health care costs increase with age and in considering the current uncertainty surrounding the healthcare market.<\/p>\n TrueNorth Wealth is a financial planning firm<\/a> with proven results in personalized, fee-only financial guidance to individuals and businesses. To learn more about our Retirement Planning services, visit our website <\/a>or contact us using the form below.<\/p>\n 3 Things to Cut Back on for Early Retirement<\/a><\/strong><\/p>\n Is it Time to Rethink Retirement?<\/a><\/strong><\/p>\n Saving as You Near Retirement<\/a><\/strong><\/p>\n How Much Do I Need for Retirement?<\/a><\/strong><\/p>\n Retirement Income Strategies<\/a><\/strong><\/p>\n What is a Retirement Account?<\/a><\/strong><\/p>\n Your 401k Rollover Options<\/a><\/strong><\/p>\n You\u2019ve Started Drawing Money from your 401(k), Now What?<\/a><\/strong><\/p>\nRelated Reading:<\/h3>\n