Some of you might be looking forward to retiring at a ripe age and finally taking that long, much deserved, permanent break from work and enjoying your golden years. The thought of retiring, although quite pleasant, does raise the complicated question of retirement planning. Post employment financial planning may seem like a daunting task but in these troubled times of creeping economic growth, it is a necessity.
People with small savings have always been at risk. Modest retirement funds and the hopes and dreams attached to them have been subjected to a slew of economic problems. National financial stability is still a distant wish. Tough times call for long term financial planning in and in some cases, this period is quite crucial for setting up a post employment financial strategy. Here are a few of the aspects you need to look into when it comes to planning you retirement.
Social Security forms the backbone of the financial support millions of retired Americans receive as a part of their benefits. Investing in a 401(k) plan, a Roth IRA (Individual Retirement Account) and a HAS (Health Savings Account) might seem like it will see you through the years after you retire but the fact is, Social Security will form the basis as well as supplement your post retirement income.
The more numbers of years your work, the greater Social Security benefits you will reap. Therefore, there is a positive effect of postponing your retirement by a couple of years to 3 years at the most. The ideal time to do this would be between the age of 62 and 70 and for every year that you delay retirement, you will gain an additional 8 percent Social Security benefits.
Moreover, working the extra number of years would also mean that you stay covered by your employer supported health insurance, add to your Roth IRA and your 401(k) funds, increase your pension and reduce the number of years you would need to use your retirement benefits over.
Pension and retirement assets
Employer pension is nothing more than an annuity which gives you a steady and timely amount as a part of your retirement benefits. Post retirement, it is always a good idea to save a portion of your pension paycheck to insulate your personal finances against the effects of inflation and other unpredictable financial downfall.
You might already have a significant amount of funds locked away in an HAS, IRA or a 401(k) but that should not deter you from seeking further avenues of investment once you have retired. There are a number of options available like bonds, variable annuity, total return portfolios, etc. You should always strive to bolster and supplement your post retirement income in every possible way.
Mortgage and insurance
It has always been considered a rule of thumb to pay off the mortgage on your home before you retire. This remains true to date although there are other concerns which have come to the front in the light of recent economic upheavals. You like many others must consider the value of your property in the same light as your retirement funds. Even though its not wrong, its far from being prudent. The financial meltdown of 2008, the subprime mortgage crisis and the collapse of the housing bubble should always be kept in mind even if home value hasn't dropped in your neighborhood in the last 5 years. It is therefore not recommended that you rely on a home equity line of credit as a part of your retirement fund.
Long term care and emergency medical needs are extremely crucial components of your retirement plan. Health and disability insurance supplemented by Medicare will be forming the basis of your medical costs which will also let you use your retirement funds for other, more pressing purposes. Another good investment during your pre-retirement days would be to put your money in a high deductible health plan (HDHP) and gain access to a health savings account (HSA) which will let you withdraw tax free dollars to meet qualified expenses.