The Truth About Retirement Planning No One Talks About
We’ve made a list of the unseen and sometimes forgottenaspects of retirement planning. Getting into all the not so fancy or big partsthat still make a difference in your life and your financial plan.
Key Points – The Truth About Retirement Planning No OneTalks About
- Social Security benefits and retirement savingsare taxable
- Medicare doesn’t cover all your healthcare costs
- Turning a half-year older
- What you’ve acquired and saved for in youraccounts may need to last for decades
1. Social Security benefits and retirementsavings are taxable.
Understand thecosts involved and how taxes affect your financial plan. There are severalstrategies you can employ now to help navigate taxes smoothly and avoid payingmore than necessary. Remember, your 401(k) isn’t entirely yours.
The advantage oftraditional retirement accounts is that you don’t pay taxes on themimmediately, as they are funded with pre-tax dollars. The IRS hasn't collectedtaxes on this money yet. This means that when you eventually withdraw thosefunds, you will owe taxes on them based on the tax rate at that time.
Learn More: Your 401(k) Isn’t All Yours(Here’s Why)
2. Medicare doesn’t cover all yourhealthcare costs.
Medicare does notcover all of your healthcare costs, so it’s important to include healthcareplanning in your retirement strategy. Determine how Medicare will work for youand consider ways to address any gaps in coverage. You can use Health SavingsAccounts (HSAs) as part of your planning. Additionally, if your family has amedical history that may affect your healthcare needs, be sure to take thatinto account. It’s always better to be overprepared than underprepared,especially when considering you and your family's healthcare in retirement.
Learn More: Many Illinois Retirees Don’t Know ThisMedicaid Planning Option
3. Turning half a year older.
Who knew thatretirement ages could be divided in half? Your half birthday has never meant somuch. Timing and ages are changing, impacting the milestones you need toachieve, so stay informed and prepared for how this will affect you.
- 59 ½ - At this age you can withdraw funds fromtraditional IRAs and 401(k)s without incurring a 10% penalty. This age ispivotal for retirement as it marks the transition from saving to activelyimplementing your retirement plan.
- 70 ½ - Required Minimum Distributions (RMDs)begin on all traditional IRA and 401(k) retirement accounts. But now, for mostpeople, it’s changed to age 73. But you can make Qualified Charitable Donationsfrom your IRAs at this point as well, using that as a way to count towards yourRMD, but it is not included in gross taxable income.
Mark these halfbirthdays in your calendar to avoid missing them and prepare for them in yourretirement plan so you can take advantage of the benefits or penalties youcould incur.
Learn More: 3 RetirementMilestone Ages
4. What you’ve acquired and saved for inyour accounts may need to last for decades.
We are living longer, and that could mean a longerretirement for you. Which is great until you have to realize that you have toaccount for those extra years and pay for it. Along with the consideration oflong-term planning and how that will affect the longevity of your income planthat has to last you through retirement.
Don’t forget about inflation and the other things thatimpact the power of your savings over the years. Plan for about a 3% impact onyour savings every year due to inflation. So, you need to work out strategiesto account for that loss in your retirement plan.
Understand what you're going to have coming in duringretirement and what amount you will need monthly for your living expenses.Keeping a budget or an income plan because your income will look different, asyou will be paying yourself instead of receiving a paycheck from your employer.But plan for a longer retirement than the one your parents had, because peopleare living longer on average and things keep getting more expensive.
- Delay Social Security benefits, so you will receivea higher amount coming to you.
- Consider annuity, as it’s guaranteed income,working similarly to a pension.
- Long-term healthcare planning should be stronglyconsidered as we live longer. There’s bound to be a time in which you need toconsider nursing homes.
Meet with a financialadvisor who can help you put these things into place and help you navigate anincome plan to prepare for a longer retirement.
Learn More: Why Retirees With$1M Actually End Up With $4M
Conclusion:
Your retirement is often referred to as your golden years, and you likely spend a lot of time planning and preparing for it. However, it's easy for some important details to slip through the cracks during this process. Planning for retirement can be stressful and involves many questions as you navigate a new financial landscape. To help you understand what you need to know and how to make it happen, it’s a good idea to talk with a financial advisor.
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