Thursday, May 30, 2013

Marvelous Ways to Plan for Retirement When It’s Around the Corner

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If you haven’t saved enough for your retirement, why not? Whatever method you choose it is a known fact that unless you are born in a wealthy family you will have to save for retirement. This translates into contributing to a retirement account for a minimum of 20 years depending on your salary but more likely for 25 to 30 years or more on a consistent basis. The key to planning for retirement is to plan. 

According to the US Census Bureau the average savings of a 50 year old is $43,797. Americans older than 50 purchase 77% of all prescription drugs, 61% of all over-the-counter drugs, 47% of all auto sales and 80% of all luxury travel.  These are alarming statistics and reinforce the need to plan for retirement.

No matter what your age you should put some money aside for your retirement even if you have to get a job after retirement which is better than having no money saved at all.  Many people do not save enough and end up having to work well past their desired retirement age or have to get part-time jobs because social security is not enough to cover all of their expenses. Don't panic and get overwhelmed by the media, fear, anxiety and nervousness of those around you. Don’t let emotions cause you to make bad decisions. If it sounds too good to be true it is. Avoid letting someone invest money for you that is not a licensed professional. Here are 19 marvelous ways to help you plan for retirement.

  1. Pay off car loans or mortgages prior to retirement.
  2. Get current on late payments.  Pay off collection accounts, judgments, tax liens, then pay off everything else because these items impact your credit score the most.
  3. Keep debt at 15% or less of your monthly income after taxes. Avoid making large purchases 1 to 5 years prior to retirement unless you know you will be able to pay the debt prior to retirement.

  1. Avoid risky products and services such as a reverse mortgage, home equity loan or line of credit, balance transfers, rent-to-own products and payday loans.
  2. Verify everything you hear or read to ensure you are getting accurate information especially when purchasing a service or getting professional advice.

  1. Ensure you have adequate coverage for health, life, disability and long-term care. Review coverage needs annually and consider coverage needed during retirement.
  2. Perform estate planning and create a will and trust even if you are not wealthy.
  3. Increase retirement contributions with each salary increase.
  4. Save at least 10-20% towards retirement each month.
  5. Invest in tax free investments. Save money in a tax free ROTH IRA account to prevent paying taxes during retirement. Maximize tax deductions and advantages.
  6. Delay social security or other benefits.  Draw your social security benefit or other benefits at full retirement age to get the maximum amount you are entitled to receive. 
  7. Consider moving to a less expensive area or income tax free states such as Florida or Nevada, Alaska, South Dakota, Texas, Washington, Wyoming, New Hampshire and Tennessee.
  8. Consider where you want to live, what lifestyle you want to have, your health condition, cost of living, and other expenses during retirement and plan for those items.
  1. Create an emergency fund with enough money to cover monthly bills and expenses for 12 months.
  2. Create a home repair fund with enough money to cover home repairs for 6-12 months.

  1. Create a budget or spending plan to track spending daily, weekly or monthly so you always have a record of how much you earn, spend and owe.
  2. Downsize your lifestyle - trade in a luxury car for a cheaper model or move to a smaller home.
  3. Buy more needs vs. wants.  Delay large purchases until you save enough to cover the cost.
  4. Scale back expenses at least 1 to 5 years prior to your retirement date to reduce spending by 30%. Don’t buy things you don’t need or just because something is on sale.

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