If you have been procrastinating on your retirement plan, now is the time to get started. Many people wait until they are close to retirement age before starting their plan. But if you start in 2021, there will be many more years for your money to grow and give you a better chance of achieving financial security.
To Know How Much You Need To Retire
To know how much you need to retire, you will need to calculate your net worth, including cash, investments and real estate. Once you have that number, divide it by the age of retirement in years. Then ask yourself if this is how much money you would like as a monthly paycheck when retired?
If the answer is no, you reassess your investments and make changes until you reach your desired number of monthly retirement paychecks. Moreover, opt for the various types of annuities to increase your cash flow post-retirement.
Reduce Your Tax Burden
If you are saving for retirement, it is possible to reduce your taxes on income and capital gains by investing in a 401k or IRA.
What Is A 401k or IRA?
A 401k is retirement savings account that most employers offer to their employees. This type of account has both tax benefits and penalties for withdrawals before the age of 59½.
An IRA, or individual retirement arrangement, is one way you can save money on taxes when investing in stocks, bonds or mutual funds with your money.
What Are The Penalties For Withdrawing Funds Before Age 59½?
The penalty will depend on how and when you withdraw your funds. There may be a tax hit, which could cause an increase in your total tax burden, as well as financial penalties that could include the loss of interest earned over time.
Prepare For Your Emergency Healthcare Services
If you are on Medicare, you might want to consider a Medical policy. This type of insurance covers medical expenses not covered by your federal program. If you are not on Medicare, you might want to consider a health care FSA. This type of account is an employer-funded benefit and gets deducted pre-tax.
You Can Retire Early!
Many people have left corporate work in their 50s and 60s and cannot imagine working for a boss anymore. On the other hand, if your health permits it, there is no reason why early retirement should not be an option for you.
If you have debt in student loans or credit cards, it may be best for retirement planning purposes to pay off these debts before saving any money towards retirement.
Know Your Financial Nature
If you invest in a low-risk investment, then the chance of losing money is lower when compared to an aggressive investor who might see profits or losses from their portfolio daily. Also, be honest with yourself about your risk tolerance to make the best decision for saving.
In conclusion, it’s never too late to start thinking about how you will retire. If you are interested in saving for retirement or want to know more about the different types of accounts available, contact a financial advisor today!