More women are working and taking charge of their own retirement planning than ever before. Regardless of your goals, you will need a retirement income plan that will support the retirement lifestyle you envision and help reduce the risk of outliving your savings.
WHEN WILL YOU RETIRE?
Establishing a target age is important, because when you retire will significantly affect how much you need to save.
- The longer you delay retirement, the longer you can build up tax-deferred funds in your IRAs and employer-sponsored plans.
- Medicare generally does not start until you’re 65.
- You can begin receiving your Social Security retirement benefit as early as age 62, but you may choose to wait until, or past, full retirement age.
- If you work part-time during retirement, you will be earning money and relying less on your retirement savings, leaving more of your savings to potentially grow for the future (and you may also have access to affordable health care).
- If you are married, and you and your spouse are both employed and nearing retirement age, think about staggering your retirements. This could ease the financial transition into retirement.
HOW LONG WILL RETIREMENT LAST?
To guard against the risk of outliving your savings, you will need to estimate your life expectancy. There is no way to predict how long you will live; but with life expectancies on the rise, it is best to assume you will live longer than you expect.
PROJECT YOUR RETIREMENT EXPENSES
Once you know when your retirement will likely start, how long it may last, and the type of retirement lifestyle you want, it is time to estimate the amount of money you’ll need to make it all happen.
One of the biggest retirement planning mistakes you can make is to underestimate the amount you will need to save by the time you retire. It is often repeated that you will need 70% to 80% of your pre-retirement income after you retire. However, the problem with this approach is that it does not account for your specific situation. Focus on your actual expenses today and consider whether they will stay the same, increase, decrease, or even disappear by the time you retire. And do not forget to consider the potential impact of inflation and taxes.
IDENTIFY YOUR SOURCES OF INCOME
Once you have an idea of your retirement income needs, your next step is to assess how prepared you are to meet those needs. In other words, what sources of retirement income will be available to you?
When you compare your projected expenses to your anticipated sources of retirement income, you may find that you will not have enough income to meet your needs and goals. Closing this gap is an important part of your retirement income plan. In general, if you face a shortfall, you will have five options: save more now, delay retirement or work during retirement, try to increase the earnings on your retirement assets, find new sources of retirement income, or plan to spend less during retirement.
TRANSITIONING INTO RETIREMENT
Even after your retirement day comes, you will still have work to do. You will need to carefully manage your assets so that your retirement savings will last as long as you need it to.
- Review your portfolio regularly.
- Spend wisely.
- Understand your retirement plan distribution options.
- Consider which assets to use first.
- Consider a variety of income solutions.
Unfortunately, there is no one-size-fits-all when it comes to retirement income planning. A financial professional can review your circumstances, help you sort through your options, and help develop a plan that is right for you.
It is important for you to be involved in the retirement income planning process even if you are married. While you may plan to be married forever, many women end up single at some point in their lives due to divorce or death of a spouse. All investing involves risk, including the possible loss of principal, and there can be no assurance that any investment strategy will be successful.
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