Here are the top 10 things you need to know as you plan for retirement.
1. Save as much as you can as early as you can.
Though it's never too late to
start, the sooner you begin saving, the more time your money has to grow. Gains
each year build on the prior year's -- that's the power of compounding, and the
best way to accumulate wealth.
2. Set realistic goals.
Project your retirement
expenses based on your needs, not rules of thumb. Be honest about how you want
to live in retirement and how much it will cost. Then calculate how much you
must save for retirement to supplement Social Security and other sources of
retirement income.
3. A 401(k) is one of the easiest and best ways to save for retirement.
Contributing money to a 401(k)
gives you an immediate tax deduction, tax-deferred growth on your savings, and
-- usually -- a matching contribution from your company.
4. An IRA also can give your savings a tax-advantaged boost.
Like a 401(k), IRAs offer huge
tax breaks. There are two types: a traditional IRA offers tax-deferred growth,
meaning you pay taxes on your investment gains only when you make withdrawals,
and, if you qualify, your contributions may be deductible; a Roth IRA, by
contrast, doesn't allow for deductible contributions but offers tax-free
growth, meaning you owe no tax when you make withdrawals.
5. Focus on your asset allocation more than on individual picks.
How you divide your portfolio
between stocks and bonds will have a big impact on your long-term returns.
6. Stocks are best for long-term growth.
Stocks have the best chance of
achieving high returns over long periods. A healthy dose will help ensure that
your savings grows faster than inflation, increasing the purchasing power of
your nest egg.
7. Don't move too heavily into bonds, even in retirement.
Many retirees stash most of
their portfolio in bonds for the income. Unfortunately, over 10 to 15 years,
inflation easily can erode the purchasing power of bonds' interest payments.
8. Making tax-efficient withdrawals can stretch the life of your nest
egg.
Once you're retired, your
assets can last several more years if you draw on money from taxable accounts
first and let tax-advantaged accounts compound for as long as possible.
9. Working part-time in retirement can help in more ways than one.
Working keeps you socially
engaged and reduces the amount of your nest egg you must withdraw annually once
you retire.
10. There are other creative ways to get more mileage out of retirement
assets.
For instance, you might
consider relocating to an area with lower living expenses, or transforming the
equity in your home into income by taking out a reverse mortgage.
Read more? Visit Corliss Law
Group
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