Tips on Retirement Planning

In my research, I occasionally come across something unusual. Like this. I don’t recall ever having seen anything from the Gonzalez Inquirer – Serving Gonzalez County, Texas and the surrounding areas since 1853,  but here are some great tips on retirement planning:

Don’t think of your home as a retirement asset.

Whether you are a new homeowner or near retirement, you should not think about your home as a retirement asset, for these reasons:

  • A home is, first and foremost, a place to live, and you will always need a place to live.
  • Your home is an inherently un-diverse investment.
  • A home may be subject to debt, which means it is less valuable than it appears and could be an ongoing expense when living in retirement.
  • Relying on a home as retirement savings tends to discourage other saving.

Maximize Roth assets.

A Roth IRA or 401(k) can provide tax-free income, if you hold the account for five years and have attained age 59 1/2.  Roth IRAs also have the added benefit of being exempt from the tax rules requiring distributions starting at age 70 1/2 .

I have to take issue with this one because of the fees and expenses involved with mutual fund investments (like 401(k)s and IRAs). In addition, as baby boomers retire in larger and larger numbers, they’ll have to start taking distributions which will certainly put a heavy strain on the price of stocks, possibly driving prices down and decreasing the value of all our retirement investments.

Have a retirement income plan.

Some financial professionals suggest 80 percent of your pre-retirement income is a good retirement income goal. With this goal you can then compare your expected monthly retirement income from Social Security and any pension plan to your target monthly retirement income amount.

Plan for inflation and increasing health care costs.

Inflation and health care costs are twin traps that can erode the value of your retirement plan if you do not consider and plan for them

Maximize Social Security as insurance protection.

For most Americans the decision to defer Social Security payments as long as possible is an important action to ensure not outliving one’s assets. Social Security is typically a large source of retirement income, and its value is enhanced because it is government guaranteed and provides inflation-adjusted payments.

Here, we also have a potential problem and it’s another big one, once again thanks to baby boomers.

The longer we wait to retire, the greater our payments are projected to be — if the system is still solvent. And that’s a big “if” especially if all the other boomers decide to do the same thing and Congress continues to play chicken with entitlement programs.

Stress test your retirement plan.

For example, how would your retirement plan work if your investments grow at 3 percent a year instead of 8 percent? Stress testing your retirement plan could suggest you change your planning assumptions.

It would be fair to say that at few times in our history have futures of so many been so precarious. It would be well for all of us to consider our uncertain economy and take advantage of these tips on retirement planning.

Click here to read more on retirement planning from the Gonzalez Inquirer. I’m sure they’ll appreciate the traffic to their website.

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