When your retirement is around the corner, it’s an exciting time to start planning all of the fun things you can do now that you have free time. You may be able to take the trips you’ve dreamed of taking, spend more time on the activities you enjoy, spend time with family and friends, and plan for your family’s financial future. However, if you want to optimize the rewards or your nest egg, it is wise to plan accordingly. Here is the definitive guide to planning your retirement finances.
Decide How You Want to Receive Your Retirement Funds
You may have an idea of what you want for the immediate future, and all of those years of hard work are worth the payoff. However, it is wise to plan for the unforeseen. Consult a professional financial advisor who can help you plan your finances based on your needs and wants. He or she will first advise you to choose a method of payment, as described below.
- Lump-Sum Payments. If you acquired less than $5,000, you can choose to cash out.If you have saved more than this amount and want to receive a lump sum, you will first need written consent.
- Installment Payments. This option will pay you at regular intervals for a period of time until you run out. You may choose a certain amount you want per month until your funds run out.
- Annuity Payments. Get paid a certain amount every year. Depending on the type of annuity, you may be under contract to get paid for many years.
- Spousal Annuity. Your spouse may qualify under a plan called Qualified Joint and Survivor Annuity. This will pay the spouse a life annuity, which will support him or her in the event you pass before payment ends.
Plan Your Big Expenses.
A financial advisor is equipped to help you optimize your funds. This means planning any large expenditures ahead of time—don’t just plan out your big trips. In addition, you should consider your monthly budget and yearly goals so that you get a better idea of how you can become more money-wise.
Don’t Forget About Social Security Just Yet.
Retirees may be living longer, but the integrity of social security still stands. Many people speculate as to whether social security will hold up in the years to come, but as of now, you can benefit on the social security you have. There’s a lot of debate as to whether Social Security will withstand the years to come. Be sure to check up on your current benefits online, and look at your different payment options.
Plan Your Will.
It’s not comfortable for most, but will planning early on is your best chance to keep your finances, property, and other belongings orderly so as to not complicate your family relations after you pass. Another way to help your loved ones financially after you pass is to invest in burial insurance. Insurance from a company like Burialinsurance.org can help you and your family keep your desired service while maintaining your family’s financial stability.
Make More Money off Your Money.
There is no better way to maximize the money you have by investing some of it into stocks or real estate. Both avenues have their benefits, and investments are a great way to fund any future plans for yourself or for your family. If you want to leave a bundle of cash behind without completely losing your funds in the meantime, investment is the way to go.
Consider Working Part Time.
Retiring no longer means being resigned to golf courses or watching the midday news for the rest of your days. Instead, now is a great time to pick up the job you always wanted. Perhaps you love gardening and want to work at a plant nursery. Or perhaps you have always wanted to volunteer for a cause like GenerateHope. On the other hand, now is the perfect opportunity to create your small artisan honey business or perfect your own brand of wine. There are many opportunities to find fulfillment outside of a full-time job, and now you are your own boss.
Retirement should be an exciting time to seek new ventures. Prepare yourself for the path that you want to take by planning your retirement ahead of time.
FAQs
One example is the $1,000/month rule. Created by Wes Moss, a Certified Financial Planner, this strategy helps individuals visualize how much savings they should have in retirement. According to Moss, you should plan to have $240,000 saved for every $1,000 of disposable income in retirement.
What is the $1000 a month rule for retirement? ›
One example is the $1,000/month rule. Created by Wes Moss, a Certified Financial Planner, this strategy helps individuals visualize how much savings they should have in retirement. According to Moss, you should plan to have $240,000 saved for every $1,000 of disposable income in retirement.
What is a good financial plan for retirement? ›
A 401(k) plan is one of the best ways to save for retirement, and if you can get bonus “match” money from your employer, you can save even more quickly. A 401(k) plan is one of the best ways to save for retirement, and if you can get bonus “match” money from your employer, you can save even more quickly.
What are the 7 stages of retirement planning? ›
To thoroughly plan your retirement, the following 7 steps (in any order) are considered essential: think, budget, share, act, save, protect and review.
What is the 5 retirement rule? ›
The sustainable withdrawal rate is the estimated percentage of savings you're able to withdraw each year throughout retirement without running out of money. As an estimate, aim to withdraw no more than 4% to 5% of your savings in the first year of retirement, then adjust that amount every year for inflation.
Can I retire at 60 with $500,000? ›
The short answer is yes, $500,000 is enough for many retirees. The question is how that will work out for you. With an income source like Social Security, modes spending, and a bit of good luck, this is feasible. And when two people in your household get Social Security or pension income, it's even easier.
How long will $500,000 last year in retirement? ›
According to the 4% rule, if you retire with $500,000 in assets, you should be able to withdraw $20,000 per year for 30 years or more. Moreover, investing this money in an annuity could provide a guaranteed annual income of $24,688 for those retiring at 55.
What is a good retirement balance by age? ›
By age 50, you would be considered on track if you have three-and-a-half to six times your preretirement gross income saved. And by age 60, you should have six to 11 times your salary saved in order to be considered on track for retirement.
What is a realistic retirement budget? ›
Retirement Expenses Vary: The amount needed for retirement varies depending on factors such as age, lifestyle, health, and location. A general rule suggests 80% of pre-retirement income, but individual circ*mstances can significantly impact spending.
What are the 3 R's of retirement? ›
Three R's for a Fulfilling RetirementRediscover, Relearn, Relive. When we think of the word 'retirement', images of relaxed beachside living or perhaps a peaceful cottage home might come to mind.
The hardest part of early retirement, in my experience, was adjusting to a new lifestyle. When you retire early, you suddenly find yourself with an abundance of free time. This may sound exciting at first, but it can also be overwhelming. Without the structure of a regular job, it's easy to feel lost or purposeless.”
What are the 4 pillars of retirement? ›
Today it centers around four pillars — health, family, purpose and finances. Thought and action about each of these pillars can help in achieving your ideal retirement.
How to retire at 55 with no money? ›
If you retire with no money, you'll have to consider ways to create income to pay your living expenses. That might include applying for Social Security retirement benefits, getting a reverse mortgage if you own a home, or starting a side hustle or part-time job to generate a steady paycheck.
How do I avoid 20% tax on my 401k withdrawal? ›
Minimizing 401(k) taxes before retirement
- Convert to a Roth 401(k)
- Consider a direct rollover when you change jobs.
- Avoid 401(k) early withdrawal.
- Take your RMD each year ...
- But don't double-dip.
- Keep an eye on your tax bracket.
- Work with a professional to optimize your taxes.
The 50-30-20 rule recommends putting 50% of your money toward needs, 30% toward wants, and 20% toward savings. The savings category also includes money you will need to realize your future goals.
Can you live off $3000 a month in retirement? ›
That means that even if you're not one of those lucky few who have $1 million or more socked away, you can still retire well, so long as you keep your monthly budget under $3,000 a month.
What is the average Social Security check? ›
Social Security offers a monthly benefit check to many kinds of recipients. As of December 2023, the average check is $1,767.03, according to the Social Security Administration – but that amount can differ drastically depending on the type of recipient. In fact, retirees typically make more than the overall average.
Can I live on $2000 a month in retirement? ›
Retiring on a fixed income can seem daunting, but with some planning and commitment to a frugal lifestyle, it's possible to retire comfortably on $2,000 a month.
What is the maximum Social Security benefit? ›
The maximum Social Security check
Your maximum benefit if you file at full retirement age – between 66 and 67 – is $3,822 per month. Your maximum benefit if you file at age 70 – the age when extra benefits stop accruing – is $4,873 per month.
