All retirees hope and pray they will have enough ready money to see them contentedly through their retirement duration. The option is visibly more threatening, namely they will outlast their savings. The fact that generally baby boomers have yet to understand that even through they will have their parent's investments and life insurance plans to live off of we as a society are living longer. Baby boomers will need to live on their retirement savings many times longer than actuaries used in their precious calculations.
The magic retirement age of 65 was historically chosen not arbitrarily by the German Kaiser in the introduction of the original pension plans, as this at the time was the normal life span of most male workers. As most baby boomers know and anticipate, modern medicine, conveniences and amenities have pushed that envelope farther down the road. You may like it or not before your retirement savings anticipated a 10 year payout period. Now it may be closer to 25 to 30 years. Many financial advisors are pushing calculations to 100 or 105 years of age.
The thought of having to lower their standards of living and giving up some luxuries to make ends meet is for many people, the most worrying aspect of their freedom years. Often, though, the imaginary fears are overstated. It is often said that 99 % of the things you fear will never come to pass. But why chance it? The basic rule is that by not preparing and leaving things to the last moment or to chance severely limits your options and causes needless stress and worry.
The good news is those who have planned their finances vigilantly during their working years will regulate with ease, and their retirement years can be the most enjoyable years of their life.
Part of the secret is to manage one’s savings in retirement. Essentially today’s workers are looking at two choices. They can work longer so that they can spend more or they can retire sooner and spend less. Another alternative is to do a bit of both and reduce your workload and in effect semi-retire. By planning in advance you may well have more than one choice.
Taking early retirement before your pension begins offers a number of options. You can downsize your house to free up some of your tax free some of your financial resource, and live on that pool of cash. This is particularly a priceless option now with low interest rates driving large increases in the assessment of real estate and as well creating a frenzy of purchasers eager to buy up your property. If the retiree has profited from company stock options they can use these instruments to bridge them until the time their company pension plan starts. Or they can extract from their retirement plans if authorized or withdraw from their savings.
Controlling one’s investments does not stop at retirement. Individual income, needs and expenses will differ, but when liquidating investments a tax efficiency strategy will preserve more of your hard earned investment dollars.
Keeping taxes in mind in your financial planning process is critical. The goal is not how much you make on an annual bases but it is how you much you keep. The same of course is true when cashing in investment vehicles. You always have to be mindful of the tax costs.
Much of retirement planning plans depends upon the difference between the tax brackets at the time of investing during your tax earning years compared to your tax bracket during withdrawal in your retirement years.
Remember those that those that fail to plan ahead will plan to fail.
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