Retirement Planning Guide For Seniors

Retirement Planning Guide For Seniors

When one is young, planning for retirement is an issue that seldom crosses the mind. Retirement planners believe that in order to enjoy a lifestyle in retirement parallel to the present one, the individual needs 70 to 90 percent of the pre-retirement income. In today’s world, the wordretirement’ has got a new found definition.

For a growing number of seniors, retirement is an invigorating experience filled with options never available before. The concept of traditional retirement in terms of a life of leisure in Florida, Arizona, Texas or another Sunbelt state is rather outdated. Today's seniors are healthier and more active. In recent times, planning for retirement incorporates much more than just the financial aspect. Retirement planning comprises of thoughtful planning of the way one wishes to spend the rest of his or her life, be it starting one’s own business, part-time work, consulting, volunteering or mentoring.  

Most retirement planning specialists hold the opinion that one of the first keys to successful retirement planning is starting early in life. Undoubtedly, this stands true as the earlier one starts saving for retirement, the more money one will accumulate due to compounding of dividends and interest. The differentiation can be astounding. Those who started saving at the age of 40 will have to save over three times the amount of money that one would have if the person had started at the age of 25 to have the same amount of money at age 55. However, it is never too late to begin. As per expert rationale, one requires three main sources of retirement income; the Social Security, pension and personal savings that include profit sharing, IRA's or 403 (b) plans. It is prudent to max out the employer sponsored retirement plans since these serve as great means to save for retirement. Along with the immediate tax savings these offer, many employers offer incentives such as matching a percentage of contributions. IRA's or individual retirement accounts are also brilliant ways to save for retirement. This money is put away pre-tax, therefore when one withdraws this money at retirement time the person is in a lower tax bracket. However, the limitation of IRA is that it is not possible to use this money before a certain age without significant tax penalties.

Life expectancy has certainly increased. This calls for contemplating safe ways to continue to build on one’s wealth even after retirement. Money market funds are a good option as they involve minimum risk of going down in value. Most financial planners suggest setting aside six months of normal expense money to cater for emergency. 

Seniors can also opt for reverse mortgage. A reverse mortgage can be a large part of retirement planning. This is where a homeowner, 62 or over, can convert part of the equity in their home to tax-free income without having to give up title or sell their home. The amount of a reverse mortgage is based on many factors such as age, appraised home value and current interest rate. The money can be paid to the homeowner in the form of a lump sum or in fixed monthly payments or as a line of credit. Mandatory credit counseling is required before applying for a reverse mortgage. Some seniors use annuities to help make their retirement comfortable. Annuities are contracts issued by life insurance companies that guarantee periodic payments for life. If one buys deferred annuities throughout the working years, the funds accumulate tax deferred.

These days there is no dearth of avenues available to assist towards an enjoyable retirement, devoid of financial worries and woes. Seniors need to educate themselves of the options and choose the one best suited.

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