Retirement can be stressful, and stress is a window for other medical conditions to creep into your life, such as heart conditions, blood pressure concerns, etc. Hence, planning for your retirement in advance can help manage your finances better, and bring you peace of mind – particularly nowadays, when there is such uncertainty regarding medical care.
Let’s dive into a few tips for easily tracking your finances, and amplifying your investments.
Move All Accounts to a Primary Account
The secret to living stress-free is often as easy as simplifying the finances in your life. Over the years, you may have accumulated a large number of credit cards, retail cards, investment accounts, bank accounts, and savings accounts. Given there are multiple statements, passwords, and cards to wrap your head around, managing your finances may seem like a colossal task. Managing multiple accounts can become incredibly tiring after a while, especially at the time you are meant to be enjoying your life.
As you reach your retirement age, consolidating your cash can often translate to effective management of statements and finances. It is better to minimize your accounts, and shift to a primary account for easier tracking and paying off your debts. Transferring any investment accounts to one primary broker often leads to optimal management, hence, put your faith in only one who fulfills your needs.
Ideally, transfer all assets to one institution, and limit yourself to only one saving and checking account. As a preventive measure, hold on to one card you’ve had the longest, and cancel the rest. Hence, you should have only one credit card, and one reward card. Cancel any retail cards and credit cards you may own with high-interest rates – especially those leaning in the 18% bracket.
Obviously, this retirement advice is aimed at those with small amounts spread out over a lot of different accounts. In many situations, consolidating your accounts would be detrimental.
Consider Fixed Income Annuities
Although some of the bad annuities still exists, this insurance based product has come a long way. Annuities can bring a sigh of relief to retirees who worry about loss of income post-retirement. These are products that usually offer a fixed income over investment, and may last over the years, providing a steady flow of income through your retirement.
By paying an upfront amount initially, you can secure a stable stream of income until the annuity period reaches its end. Additionally, these are simple to withdraw and easy to manage, hence, moving your scattered investments to annuities is the smart move.
However, it is recommended that you study which product best suits your needs, its associated fees, and the implications of purchasing an annuity.
Boost Social Security Payouts
A social security retirement plan is a useful add-on to the income you earn post-retirement. However, the amount of earnings needed to qualify for social security credits increases every year, while early retirements reduce earning potential.
Ideally, applications for benefits need to be sent four months before the date you wish to receive your benefits; however, to maximize your earning you can delay the payout period till the age of 70. These decisions are non-reversible, and have a lasting impact on your benefit payout. Hence, it is recommended to coordinate the date with your spouse’s to maximize your payout benefits.
All benefits take inflation into account, and in a shaky economy, would mean little in terms of actual value. Therefore, we advise that you speak to a professional who can guide you on the best available options, suited to your retirement expectations.
Take Advantage of Tax Benefits
Consolidated income streams can make taxes simpler for you. Also, holding income in one place such as a tax-deferred retirement account may result in hassle-free withdrawals during tax time.
If you are above the age of 50, it is preferable to defer paying income tax and contribute the taxable income into a 401(k) account. This contributed amount would increase in monetary value, and would be taxable only at the time of withdrawal.
If you wish to receive tax-free income post retirement, you may contribute income after paying taxes in a 401(k) account – thus, saving extra dollars for your retirement.
Consider Where You Live And How You Live Before You Retire
It might sound obvious but as many people retire they unfortunately don’t consider whether they want to own a home, rent a home or even whether they state they live in makes financial sense. Owning a home debt free is a goal for many, but often having that much money tied up in a home in retirement can be a detriment. Once you retire you essentially have no income which makes banks less likely to give you a loan. Should you need the money that is tied up in your home it might be difficult. However, the alternative, renting means you’ll always be paying rent and have little control over the future. Not an easy choice to be sure, however, it’s much better to make the decision before you retire rather than after.
In addition, consider now whether it’s worth it to move to an income tax favorable state like Texas or if it makes more sense to buy in a state that has more buying power, like Arkansas.
Planning and better control over your income is key to having an easy and peaceful retirement. Small steps such as cutting down excessive spending, getting rid of credit cards with high interest rates, and consolidating your scattered investments can streamline your expenses – thus, giving you peace of mind.