Are you thinking about retirement soon? If so, now is the time to start planning. Even if you are planning to work a couple more years or 5 more years, taking the time to plan now will give you a head start on your future. While most people know that they want to retire, many are unsure of things like when they will retire, what their budget will be, how long they need to make their money last, and so on.
Since income in retirement is the key piece of retirement planning, it only makes sense to start there. Here are four key components you should consider while setting your retirement income goals.
4 Key Components of Retirement Income Planning
- What age do you hope to retire? Having this number in mind will set the stage for the rest of your retirement income planning process as several planning components will be affected by the age you decide to retire. Here are some important ages to note while estimating your goal retirement age.
- 59 ½ – when you can start taking penalty-free from your retirement plans
- 62 – when you can start taking Social Security
- 65 – when you can enroll in Medicare
- 70 – is the latest you can wait to take Social Security
- 70 ½ – You can begin to make Qualified Charitable Distributions
- 73 – is when RMDs start. In 2033 it goes out to age 75
- How long do you anticipate your retirement will last? 20 years, 30 years, or even 40 years? The truth is, none of us know how long we will be here, and many Americans are living longer and longer. Those things considered; it does make estimating the length of your retirement a bit tricky. We recommend considering your family history and erroring on the side of caution because no one wants to go back to work when they run out of money in retirement. In fact, when we plan for our clients’ retirement we typically plan for them to live to age 100.
- Consider your expenses. What current expenses do you have that you will carry over with you into retirement? Do you plan to travel or pick up a new hobby? Budgeting is an integral part of this step, if you budget too little the plan may look good on paper but when you see you are withdrawing more than estimated that will add up and could quickly derail a successful retirement plan. And do not forget about inflation – the items in the first year of your retirement budget won’t cost the same 10 and 20 years down the road. Whatever you determine your first-year budget to be, keep in mind that you should allocate 3% more each year to account for inflation.
- Work with a Financial Advisor that focuses on retirement planning. The right financial advisor can walk through these steps with you and ensure no stone goes unturned. At Kowal Investment Group, we create retirement incoming planning scenarios for our clients based on their goal retirement age, estimated length of retirement, expenses, how much the client like to spend, when is the best time to take social security, and so on. There are a lot of factors to consider, and no two people have the same idea about what they want their retirement to look like. This is why your retirement income plan should be specific to you and your goals. As your goals and needs change, we will update your plan to reflect them.
Now that you know where to get started in the planning process, it is time to take the next step and schedule a meeting with one of our fiduciary advisors. We will work with you to create a customized retirement plan that reflects your specific goals and needs.
Don’t wait, schedule your no-obligation retirement review today!
Disclosures:
This material is being provided for information purposes only and is not a complete description, nor is it a recommendation. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Please note, changes in tax laws may occur at any time and could have a substantial impact upon each person’s situation. While we are familiar with the tax provisions of the issues presented herein, as Financial Advisors of Kowal Investment Group, we do not render advice on tax or legal matters. You should discuss tax or legal matters with the appropriate professional.
Kowal Investment Group, LLC (“Kowal”) is a Registered Investment Advisor. Kowal will maintain all applicable registration and licenses as required by the various states in which Kowal conducts business, as applicable. Kowal does not provide legal, accounting, or tax advice. Consult your attorney or tax professional. Representatives have a general knowledge of the Social Security tenets. For complete details on your situation, contact the Social Security Administration.
