Your Financial Future: Retirement remains concern for many
The number one concern for people as they approach retirement is whether or not they will they have enough income once the paycheck stops coming in.
In fact, a recent MetLife study found this to be the number one concern and that knowing this was true would satisfy 68 percent of the respondents. You do not want to have to go back to work after you leave your current job unless it is your option, not need based. Many retirees do plan to work some after retirement.
This income can come from a variety of sources including Social Security, pensions, 401(k) and IRAs. How much will you need and which sources will you use first? How will health care cost affect your retirement? Most people spend more on medical cost as they age. In fact many people think that getting on Medicare will take care of all of their medical expenses. This is not true. While Medicare is important, it has many gaps that could expose you to considerable out of pocket expense.
People face many other questions as they prepare to retire. Where will they live? Will they move closer to family members out of the area or to a warmer climate? If this is the case, you must estimate living expenses in the new location and the value you can receive by selling your current home.
People are often surprised to find out that they have been told to invest in products that do not meet their needs. There is no perfect financial product. Each has its own expense, liquidity, volatility and other concerns. This is okay if you understand the weakness and have the correct pool of money invested in them. Tax structure is an important consideration when deciding which assets to use.
Taxes are a major impact that too many people forget about controlling. You can mitigate this expense with proper planning. While having large balances in 401(k)s and IRA is great, they can be a tax time bomb. With proactive planning you can lessen the damages that taxes make in to your retirement.
While we are talking about taxes, many people do not realize that continuing to work when you are receiving Social Security can reduce your benefit if you are under full retirement age. This fact may influence you to wait longer to file for Social Security or to work reduced hours.
There are several different strategies to create an income stream during retirement. We will discuss the different options when we start the New Year. Have a great holiday season.
Your Financial Future is written by certified financial planner Gary W. Boatman, MBA and CFP, who also wrote the book, “Your Financial Compass: Safe Passage Through The Turbulent Waters of Taxes, Income Planning and Market Volatility.”