7 Simple Suggestions for Planning Your Dream Retirement
Retirement doesn’t have to be boring. In fact, it isn’t supposed to be. Just because you’re not working anymore doesn’t mean you won’t have lots of things to do to fill your days.
You can travel, volunteer, attend fundraisers to support your community and more.
However, in order to have fun in retirement, you’re going to need money. Here are 7 suggestions to help you save for your dream retirement.
1. Map Out Your Retirement Plan
What kind of retirement do you want? Do you want to travel? Do you want to live in a beach- or lake-side cottage? Or will you stay in the home you raised your kids in?
You can live however you like during your golden years, as long as you plan ahead.
2. Determine How Much You’ll Need
Once you’ve decided what your dream retirement looks like, you need to research how much it will cost to sustain that lifestyle.
There are many free online calculators that can help you determine how much you’ll need to save to generate a given amount of cash flow. However, you’ll have to find out a ballpark figure for how much that beach-side cottage or your travel plans will cost and plan accordingly.
3. Knock Out Your Debt
By the time you’re 50, many experts suggest that you really shouldn’t have any debt outside of your mortgage. If you haven’t paid off your debts, now is the time to knock them out. If you still have a mortgage, knock that out, too. You don’t want to go into retirement with outstanding debts to pay.
4. Consider Maxing Out Your 401(k)
You don’t have to pay income taxes on your 401(k) until you pull the money out. Since you might be in a higher tax bracket in your 50s, delaying that tax bill until retirement could work in your favor. For 2020, you can contribute up to $19,500 per year, and anyone over 50 can contribute an additional $6,500.
5. Look at an IRA
If you’ve maxed out your 401(k) and still have money that you can sock away, look into opening an IRA account. The maximum contribution for 2020 is $6,000, with an extra $1,000 for people over 50.
6. Open an HSA
A Health Savings Account can be an excellent way to reduce your taxable income and squirrel away money for your nearly inevitable health care expenses. You can contribute money and let your savings potentially grow, tax-free. When you turn 65, you become eligible to withdraw money and pay no taxes or penalties as long as you use the money for qualified medical bills. (You may be taxed and penalized for non-qualified withdrawals).
7. Understand Your Social Security Benefits
Waiting longer to retire can be a benefit to you with Social Security. Technically you can start withdrawing funds at age 62, but you’ll receive a permanently smaller monthly check than if you wait until full retirement age (66 or 67). Waiting until 70 can pad your check a little more.
Living the Dream
Your retirement years can be some of the best years of your life. Plan your retirement savings well to have the funds available to do the things you’ve always wanted to do. And don’t forget to take good care of your mind and body so you’ll have the health you need to enjoy them!
Withdrawals from IRAs and 401(k)s are taxed as ordinary income and if taken before age 59½ are subject to an additional 10% federal penalty.
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