What to Consider in Planning for Retirement

Maintaining a comfortable lifestyle after you leave the workforce while attainable will not happen without planning for retirement. It’s absolutely essential to take the time to develop a retirement plan for yourself and anyone else you plan to support to guarantee your financial independence during the 20 or even 30 years following your retirement. You can build a retirement plan on your own using many of the worksheets available online or you can engage one of the companies that provides retirement plan services.

Desired Retirement Age and Life Expectancy

One of the first things you want to consider in planning retirement is your desired retirement age. Most people retire between 55 and 65 with 62 the average age in the United States. Though it may be difficult consider how long you expect to live, your parents’ longevity might be some indication of your own. The average U.S. life expectancy is now considered to be 78.

Financial Retirement Planning

Don’t wait until you leave the workforce, start doing your financial planning for retirement now while you still have time to put money into savings and fund your 401 k and IRA to the maximum contribution. Consider your expenses today and how they will change over time. For example, you may no longer have a mortgage or car payment, yet some costs such as medical care will undoubtedly increase. In your planning take into consideration things you’ve always wanted to do – travel more or invest more time in hobbies. These too can add costs.

Compare projected expenses against your anticipated monthly income from public and private pensions and how you can, if necessary, make up the difference from savings, investment or your property.

Where You Want to Live

One of the biggest decisions you may make and possibly one of the most important is where to live. Where you live is a big part of your overall retirement planning since it not only affects your housing costs and state and local taxes , but your emotional and physical well being. In addition to differences in home costs from region to region, home heating and cooling costs will vary. Your planning also should take into account the cost of local or regional assisted living or nursing home facilities in the event you eventually need such care.

Taxes and Inflation

Keeping in mind the retirement tax on retirement accounts, you will need to plan when to start making withdrawals and how much in order to avoid paying significant tax on retirement income. Also you may need to pay federal income taxes on your Social Security benefits if you have other substantial income – wages, self-employment, interest, dividends and other taxable income.

Even though inflation may be hard to predict, you should factor it into your financial retirement planning. An amount as little as four percent, for example, could affect your buying power by half over the next 25 years.