Retirement: What You Should Consider
We all dream of a “successful” retirement, but are you doing anything to help make that success a reality? The truth is that a prosperous retirement isn’t going to just happen. You have to plan in order to find success in retirement. As you consider your retirement options, consider, too, the following:
Where Will Your Money Come From?
The first thing you need to figure out is where your money will come from. You can practice looking for money leaks in your budget right now, in order to reduce your spending. However, you can’t just rely on downsizing during your retirement. You also have to know where your money is going to come from.
Most people assume that some of it will come from Social Security, and some of it will come from the distributions they take from a retirement account. However, what happens if Social Security fails, and the stock market crashes right before you retire? You need a contingency plan. To help diversify your options, you can look for ways to make more money now, building income streams that can help you later on. Think about where your money will come from, and take steps now to make sure that you are ready.
What Obligations Will You Have?
You should also consider the obligations you have. When you are living on a fixed income, especially if you will rely a great deal on Social Security, the more obligations you have on your income, the harder it is to enjoy a successful retirement. Consider your liabilities, and how you can get rid of them before you are ready to retire. That way, if something does happen to your income before retirement, you will have fewer expenses to worry about. Some of the obligations you should make a plan to get rid of before you retire include:
- Credit card debt
- Student loans
- Car loans
- Other consumer debts
The fewer expenses you have, the simpler your finances can be — and the easier it will be to remain ahead as you live in retirement.
What Will Your Taxes Be?
You also need to consider your tax situation in retirement. Do you think you will be in a higher tax bracket? Even if you won’t be in a higher tax bracket, there is the possibility that taxes will be higher when you retire. If you are concerned about paying more taxes later, you can make the choice to pay taxes now. Instead of putting more of your money in a tax deferred account, you can put more of your retirement contributions in a Roth IRA or Roth 401k. You have to pay taxes on your income now, but in the future you won’t be taxed at all on distributions. Carefully think about the possibilities, and consult with a tax professional who can help you figure out a tax strategy that is likely to work best for you.
Retirement is something that requires though. If you want to be financially secure later, you have to start taking the appropriate steps now.