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Feathering Your
Nest Egg - Advice
for Retirement
Planning and Life During Retirement
As you approach retirement, your thoughts turn more and more to final preparations and continuity of your lifestyle during retirement. A major focus should be your financial resources and available options to help support your retirement. Below is some advice to consider while preparing for and during retirement.
Looking Ahead
Much of your retirement planning involves predictions for the future. In order to know if you are on the right track, you should have a reasonably accurate picture of your future financial needs. To do that, there are two important things to predict.
First, predict your retirement spending level. Set up a retirement budget for the duration of your retirement. Refer to your current budget as a guideline, but consider the fact that your retirement lifestyle will likely call for some adjustments. For example, you may have additional travel or recreational expenses during retirement, but you may spend less on clothing or day-to-day transportation expenses. Many experts recommend that the average retiree will need 80-90% of pre-retirement income during retirement. Once you have established a budget, commit it to writing for reference in planning for your golden years.
Next, predict when you plan to retire. Once you have an idea of when you expect to retire, you should adjust your savings routine as needed. Keep in mind that it takes more cash savings to support an earlier retirement than a later one, and less cash savings are needed if you plan to work full or part time until a more advanced age.
Whatever your plans may be, it is important not to leave the workforce until you are financially ready to do so.
Capitalize On Your Capital
Pay attention to the rate at which you withdraw or plan to withdraw funds from your investments. There can be great financial advantages to holding off on withdrawals for as long as possible. Withdrawing less frequently makes it less likely that you will outlive your funds; furthermore, your investment returns will increase by leaving more of your capital invested. A reasonable and safe withdrawal rate usually lies between 3-4% annually.
Maximize and Minimize
Choose or remain in investments that maximize your investment returns and reduce unnecessary costs like commissions and management fees. Lower cost investment options will act to boost your returns. Also take maximum advantage of tax-deferred and tax-free retirement plans like 401(k)s
and IRAs to minimize your
tax burden.
