Retirement, often viewed as the payoff for years of hard work and prudent saving, is envisioned as a period of joy, companionship, and leisure. The recent pandemic has highlighted the importance of financial security for a comfortable retirement. As a result, Americans are prioritizing strengthening their economic positions.
Furthermore, a survey conducted in 2021 by Ameriprise Financial revealed that the global health crisis had propelled individuals to enhance their financial perspectives, with many implementing retirement savings and estate plans and seeking help from financial advisors.
Here are four critical steps to formulating a robust retirement plan.
#1 When to Claim Social Security
Retirees should delay claiming Social Security until reaching full retirement age. Data from the Center for Retirement Research at Boston College reveals that over 60% of people claim these benefits before they hit full retirement age, with 35 to 40% opting to do so at the earliest opportunity, age 62. However, waiting could increase the eventual benefits. With the right advice, individuals can explore various income streams and delay claiming Social Security benefits, securing full entitlements in the process.
#2 Construct a Retirement Withdrawl Strategy
Next, retirees should carefully plan the order of withdrawal from their retirement accounts. Deciding when to withdraw from retirement accounts is of significant importance. Individuals should consider dipping into their personal bank savings or investments before touching retirement funds to leverage the power of compound interest over an extended period. Experts warn that prematurely drawing from 401(k) or IRA accounts could drastically reduce the income potential during retirement years.
#3 Plan How Much You Will Need
Craft a detailed personalized plan to help you determine your financial needs during retirement. Before retiring, it is vital to have a solid budget in place. This ensures individuals understand their financial health for retirement. When preparing your budget, consider assessing monthly expenses, like utilities, rent/mortgage, and car payments—also include potential medical and healthcare costs, as well as allocating funds for leisure pursuits.
Moreover, this phase of retirement planning often necessitates decisions about downscaling or eliminating unnecessary costs to maximize retirement savings. Consulting with a financial advisor during this phase can provide a structured approach to retirement budgeting that accounts for ongoing expenses, healthcare, and leisure activities while simultaneously measuring the sufficiency of current savings in meeting desired post-retirement lifestyles.
# 4 Get Professional Help
The final strategy, seeking expert advice, has notably enhanced retirement outcomes. Navigating the complex world of investment and tax strategies alone can be challenging and expensive if errors occur. Engaging with a competent financial advisor simplifies this process and can significantly increase retirement resources – statistics suggest up to 15% more funds during retirement.