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Retirement Planning Guide: A Guide For Future Retirees

retirement planning

Retirement planning might appear challenging, but when you’re armed with the right information and a solid strategy, you can work toward retirement that’s financially sound and enriching. Our goal is to help you have peace of mind with our retirement planning guide. It’s possible with a little preparation.

Ready to dive in? We’ll start with the fundamentals of saving and investing for your golden years. Then, we’ll unpack ways to help manage your retirement income and touch on some frequently overlooked elements of retirement planning, including healthcare and estate planning.

No matter where you are in your career, it’s always the right time to start planning for your post-work paradise. So, grab a pen and paper, and let’s start mapping out your path to retirement.

Retirement Planning Basics

Retirement planning is what you should do to help you prepare for your financial future. It’s a journey that ebbs and flows with your changing needs and dreams. We recommend that you start early and stay consistent.

We’ve been helping people plan for retirement for over a decade now, and we advise the sooner you start, the better it will possibly be. Even if you can only afford to save a small amount each month, those contributions can add up over time thanks to the power of compound interest.

Understanding retirement planning

At its core, retirement planning is about setting goals and creating a roadmap to help achieve them. It involves taking a hard look at your current financial situation, estimating your future expenses, and developing a savings and investment strategy to help you have enough money to live comfortably in retirement.

Only 6 in 10 employees are truly confident they’ll be able to retire comfortably, according to SRHM (Society for Human Resource Management). Don’t be part of the worried majority – start planning and prioritizing your retirement savings today.

Setting retirement goals

The first step in any retirement plan is to set clear, achievable goals. Ask yourself questions like: At what age do I want to retire? What kind of lifestyle do I want to maintain in retirement? How much money will I need to support that lifestyle?

Your answers to these questions will help guide your retirement planning decisions and keep you motivated to stay on track. Remember, your goals may change over time, and that’s okay. The important thing is to regularly review and adjust your plan as needed.

Determining your retirement age

When it comes to deciding on the right time to retire, there’s a lot to consider – your health, your savings, and your personal goals all play a role. 65 may be the classic retirement age, but it’s by no means mandatory. Some people are opting to stay in the workforce longer, either because they need the paycheck or because they simply enjoy what they do.

Keep in mind that retiring later can have its benefits, such as giving you more time to save and potentially increasing your Social Security benefits. On the other hand, retiring early may allow you to enjoy more active years in retirement, but it also means your savings will need to last longer.

Creating a retirement budget

One of the most important aspects of retirement planning is creating a realistic budget. Start by estimating your expected expenses in retirement, including housing, healthcare, food, transportation, and leisure activities. Don’t forget to account for inflation, which can significantly impact your purchasing power over time.

Once you have a clear picture of your expected expenses, compare them to your projected retirement income from sources like Social Security, pensions, and personal savings. If there’s a gap, you may need to adjust your savings strategy or consider working part-time in retirement to bridge the difference.

Starting to save early

When it comes to retirement savings, time is your greatest ally. The earlier you start saving, the more time your money has the potential to grow. Even small contributions can make a big difference over the long term.

For a hypothetical example, let’s say you start saving $200 per month at age 25, earning a 7% annual return. By age 65, you would have accumulated over $500,000. But if you waited until age 35 to start saving, you would only have around $250,000 by age 65, assuming the same monthly contribution and return.

The example above is based on various assumptions and is, therefore, hypothetical in nature and for informational purposes only. This information is not, and should not be construed as the receipt of, or a substitute for, personalized individual advice from Riverbend Wealth Management. Nor should those results be considered indicative of future performance.

Building your retirement nest egg

Building your retirement nest egg requires a combination of consistent savings and smart investing. Take advantage of tax-advantaged retirement accounts like 401(k)s and IRAs, and consider increasing your contributions over time as your income grows.

When it comes to investing your retirement savings, focus on creating a diversified portfolio that strives to balance risk and return. Consider working with a financial advisor who can help you develop a personalized investment strategy based on your goals, risk tolerance, and time horizon.

Remember, retirement planning is a marathon, not a sprint. By starting early, setting clear goals, and staying disciplined with your savings and investing, you can work toward building your financial future and enjoy your retirement.

Retirement Income Sources

Retirement planning is about more than just stashing cash for your golden years. It’s also about mapping out where that money will come from when you’re ready to kick back and relax. From Social Security to personal savings, there are a few different retirement income sources to explore – each with its own benefits and factors to consider.

Building a strong retirement plan is like constructing a sturdy house. You wouldn’t rely on just one material, right? The same goes for your retirement income. By incorporating multiple sources of income into your retirement plans, the goal is to help create a more stable foundation that strives to withstand market fluctuations and unexpected expenses.

Social Security benefits

For most Americans, Social Security is a key source of retirement income. In fact, according to the Social Security Administration, Social Security benefits represent about 30% of the income of the elderly.

Your Social Security benefit is based on your lifetime earnings. You can start claiming benefits as early as age 62, but your benefit amount will be reduced. If you wait until your full retirement age (which is 66-67, depending on your birth year), you’ll receive your full benefit amount. 

However, if you delay receiving your full Social Security benefits until you reach age 70, you can claim a higher benefit amount. Each month you delay gives you a higher benefit amount than if you had filed in the previous month.

Employer-sponsored retirement plans

If you’re lucky enough to work for an employer that offers a retirement plan, such as a 401(k) or pension, depending on contribution limits this can be a good source of retirement income. Many employers offer matching contributions, which can help grow your savings.

For hypothetical purposes, let’s say your employer matches 50% of your contributions up to 6% of your salary. If you earn $50,000 per year and contribute 6% of your salary ($3,000), your employer would contribute an additional $1,500, bringing your total annual contribution to $4,500. This is free money that your employer is offering to you year after year, but you only get the full benefit of it if you fully contribute the full amount they will match.

Individual retirement accounts (IRAs)

Even if you don’t have access to an employer-sponsored retirement plan, you can still save for retirement on your own through an Individual Retirement Account (IRA). There are two main types of IRAs: traditional and Roth.

With a traditional IRA, your contributions may be tax-deductible, and your money grows tax-deferred until you withdraw it in retirement. With a Roth IRA, your contributions are made with after-tax dollars, but your money grows tax-free, and you can withdraw it tax-free in retirement. 

However, it is important to note that if you withdraw from your Roth IRA before your account is five years old, you can incur tax consequences and possibly penalties (10% in addition to your regular income taxes). 

Pension plans

While pension plans are becoming less common, they can still be a valuable source of retirement income for those who have them. A pension plan is a type of defined benefit plan that provides a good stream of income in retirement, typically based on factors like your salary and years of service.

If you’re fortunate enough to have a pension, it’s important to understand how it works and how it fits into your overall retirement income strategy. Some pensions offer the option to take a lump sum payment instead of a monthly benefit, which may be tempting but requires careful consideration (we advise that you speak to the appropriate professional).

Personal savings and investments

In addition to retirement-specific accounts like 401(k)s and IRAs, your personal savings and investments can also play a role in generating retirement income. This might include savings accounts, brokerage accounts, or rental properties.

The key is to create a diversified investment portfolio that aligns with your goals and risk tolerance. As you approach retirement, you may want to shift your asset allocation to be more conservative, with a greater emphasis on income-generating investments like bonds and dividend-paying stocks. Again, this can all be overwhelming for anyone so we advise that you speak to experienced professionals at Riverbend Wealth Management.

Rental income

Rental properties offer retirees a way to earn extra money. Whether it’s a vacation home that’s only used part of the year, an empty bedroom in your house, or a property you bought specifically to rent out – becoming a landlord can provide a regular paycheck in your golden years.

While being a landlord can be a lot of work, it can also be a rewarding way to generate extra income in retirement. Just be sure to factor in the costs of maintaining and managing the property, as well as the potential for vacancies and unexpected repairs.

Part-time work in retirement

Finally, many retirees choose to continue working part-time in retirement, either for financial reasons or simply because they enjoy staying active and engaged. This might involve consulting, freelancing, or turning a hobby into a small business.

Not only can part-time work provide extra income, but it can also offer a sense of purpose and social connection in retirement. Just be sure to factor in the potential impact on your Social Security benefits and income taxes.

The bottom line is that there are potential sources of retirement income, and the right mix will depend on your unique circumstances and goals. By understanding your options and creating a diversified income strategy, you can help ensure a more thorough understanding of what your retirement will potentially look like.

Potentially Maximizing Your Retirement Savings

Saving for retirement is a significant financial objective. But it’s not just about stashing away cash – it’s also about making your money work overtime on your behalf. We recommend implementing these strategies to complement your retirement savings and pave the way for a more financially secure future.

Making catch-up contributions

If you’re 50 or older, you have the opportunity to contribute more to your retirement savings through catch-up contributions. In 2024, you can contribute an extra $7,500 to your 401(k) and an extra $1,000 to your IRA on top of the regular contribution limits.

Choosing between Traditional and Roth IRAs

When it comes to saving in an IRA, you have two main options: Traditional and Roth. With a Traditional IRA, your contributions may be tax deductible (see the IRS article here), but you’ll pay taxes on your withdrawals in retirement. With a Roth IRA, your contributions are made with after-tax dollars, but your withdrawals in retirement are tax-free. Remember, if you withdraw from your Roth IRA before your account is five years old, you’ll incur penalties of 10%.

So which one is right for you? It depends on your current and future tax situation. If you expect to be in a lower tax bracket in retirement, a Traditional IRA may make sense. But if you expect to be in a higher tax bracket, a Roth IRA could be the better choice.

Investing in tax-efficient accounts

In addition to taking advantage of tax-advantaged accounts like 401(k)s and IRAs, it’s also important to consider the tax efficiency of your investments. Some investments, like municipal bonds, may generate tax-free income, while others like actively managed mutual funds, can generate taxable capital gains.

By holding tax-efficient investments in your taxable accounts and less tax-efficient investments in your tax-advantaged accounts, you can help minimize your overall tax burden and help keep more of your investment returns. This is known as asset location.

Diversifying your investment portfolio

Imagine your retirement savings as a well-prepared meal. Just as you wouldn’t want a meal with only one type of dish, you don’t want your investment portfolio to rely on a single asset class or sector. The goal of diversifying your investments is you create a well-balanced portfolio that can endure various market conditions and provide you with a satisfying retirement with less worry.

There are many layers of diversification. One layer of diversification is by investing in index funds or exchange-traded funds (ETFs) that track broad market indexes like the S&P 500. 

Regularly reviewing and adjusting your savings strategy

Remember, retirement planning is a journey that evolves with you. As life throws curveballs and the markets ebb and flow, be ready to tweak your savings strategy to help you stay on course.

That might mean increasing your contributions when you get a raise, rebalancing your investment portfolio to maintain your desired asset allocation, or even delaying retirement by a few years to give your savings more time to grow.

The key is to stay engaged with your retirement plan and make adjustments as needed. By regularly reviewing your progress and making smart financial decisions along the way, you can help to have a more comfortable retirement.

Planning for Healthcare in Retirement

Planning for retirement isn’t easy, and there’s one big expense that many people forget about: healthcare. A recent Fidelity study found that the average couple at 65 could possibly shell out a whopping $300,000 on healthcare costs in their golden years. That’s a huge chunk of change, and it’s why it’s so important to plan for this major expense in your retirement planning.

Understanding Medicare coverage

For most retirees, Medicare is the primary source of health insurance coverage. Medicare is a federal health insurance program that provides coverage to people who are 65 or older, as well as some younger people with disabilities.

Medicare is divided into several parts, each of which covers different types of services:

  • Part A covers inpatient hospital stays, skilled nursing facility care, hospice care, and some home health care.
  • Part B covers certain doctors’ services, outpatient care, medical supplies, and preventive services.
  • Part D covers prescription drug costs.

It’s important to understand what Medicare does and doesn’t cover, as well as the potential out-of-pocket costs you may face. For example, Medicare generally doesn’t cover long-term care, dental care, eye exams, or hearing aids.

Considering long-term care insurance

Long-term care can be a significant potential healthcare expense you could face in your post-work years. This type of care includes services such as assisted living, nursing home stays, and having a caregiver come to your house to support you with common daily activities like showering, getting ready for the day, and enjoying food at mealtimes.

According to the Administration for Community Living, someone turning 65 today has a nearly 70% chance of needing some type of long-term care services in their remaining years. The costs can be staggering – the median annual cost of a private room in a nursing home is over $100,000.

One way to protect yourself against these costs is by purchasing long-term care insurance. These policies can help cover the costs of long-term care services, either in a facility or in your own home. The younger and healthier you are when you purchase a policy, the lower your premiums are likely to be.

Utilizing Health Savings Accounts (HSAs)

If you’re still working and have access to a high-deductible health plan (HDHP), you may be able to save for future healthcare expenses through a Health Savings Account (HSA). HSAs offer some tax advantages: contributions are tax-deductible, the account grows tax-free, and withdrawals for qualified medical expenses are also tax-free.

Estate Planning for Retirement 

Don’t overlook estate planning. You’re taking care of your loved ones as you take care of yourself. Estate planning is a crucial aspect of retirement planning that sometimes gets neglected. 

But here’s the thing – it’s not just about you. It’s about helping your loved ones be taken care of even after you’re gone.

Updating beneficiary designations

One of the first steps in estate planning is updating your beneficiary designations. This includes your retirement accounts, life insurance policies, and any other assets that require a designated beneficiary.

Creating a will and trust

Estate planning isn’t complete without a will and trust by your side. Your will is your voice, dictating how you want your assets divided up after you’re no longer here. A trust, on the other hand, can help to alleviate the time-consuming probate process and grant you enhanced control over your destiny.

Assigning power of attorney

Don’t forget to assign power of attorney when estate planning. It’s a smart move that helps to ensure that someone you have faith in can handle your money matters and medical choices if you’re ever in a spot where you can’t.

Establishing a living will

A living will is like a roadmap for your loved ones during a difficult time. Also known as an advance directive, it clearly states your wishes for end-of-life care, so there’s no confusion about what you want. 

No one likes to dwell on their mortality, but in my experience – having these tough talks with your family now is a gift you can give them for the future. I’ve seen firsthand how a clear living will can help provide peace of mind and potentially reduce the burden on family members during a difficult time.

Incorporating life insurance into your plan

Life insurance is another important component of estate planning. It can provide financial security for your loved ones and help cover expenses like funeral costs and outstanding debts.

Leaving a legacy for your loved ones

Estate planning is all about crafting a legacy that will live on through your loved ones. It’s the peace of mind that comes from knowing your assets will be distributed exactly as you intended, and your family will be supported even after you’re gone.

Don’t leave your family’s future to chance. Crafting a detailed estate plan potentially helps your financial security and can potentially bring you peace of mind. Take the first step now – your loved ones will thank you.

Overcoming Retirement Planning Challenges 

Let’s face it – retirement planning can be challenging, especially if you’re starting late or dealing with financial setbacks. But here’s the thing – it’s never too late to start. With the right strategies and mindset, you can work to overcome these challenges and still strive to achieve your retirement goals.

Starting to save with a late start

If you’re getting a late start on retirement savings, don’t panic. While it may be more challenging, it’s still possible to catch up. One strategy is to make larger contributions to your retirement accounts, taking advantage of catch-up contributions if you’re over 50.

Managing student loans and credit card debt

Student loans and credit card debt can make saving for retirement feel impossible but don’t give up hope. With a well-crafted debt repayment plan, you can still work to manage these financial hurdles while still setting aside money for your golden years.

Recovering from financial setbacks

When life hands you lemons like a job loss or unexpected medical expenses, it’s easy to feel like your retirement plan has been shattered. But here’s the thing: setbacks are just temporary roadblocks. With the right mindset and a well-crafted strategy, you can continue working toward tackling these setbacks and planning your retirement.

Navigating job loss or career changes

Career upheavals can be a real blow to your retirement plans. Losing a job or changing fields can make you feel like you’re starting from scratch. But with a little ingenuity and some savvy planning, you can continue to adapt to these changes while planning your retirement.

Adjusting plans after divorce

Divorce can be a retirement planning nightmare, throwing your financial future into doubt. But here’s the thing: you can still focus on your retirement dreams. How? Adjust your plan to account for this new reality by being smart and proactive.

I’ve seen friends go through divorces that completely upended their retirement plans. But by working with a financial advisor and making some tough choices, they were able to get back on track and help themselves have the financial future they envisioned.

Establishing a financial emergency fund 

Life’s full of surprises, but having a financial emergency fund can help you weather unexpected storms. Build an emergency fund, get the right insurance, and spread your investments around – with the goal of being ready for whatever comes your way.

Life has taught me that surprise bills can strike when you least expect them. That’s why building a hefty emergency fund and double-checking my insurance policies are top priorities to help keep my loved ones safe and sound.

Working with a Financial Advisor 

Retirement planning can be complex and overwhelming, especially when you have worked your whole life to alleviate financial stress. That’s where working with a financial advisor can be important.

Potential benefits of working with a financial advisor

Don’t leave your retirement up to chance. A financial advisor can help provide the know-how you need for financial planning.

They can help you understand your risk tolerance and create an appropriate portfolio with the goal of your money working for you. Plus, they can help you understand your tax situation, along with your tax professional, and how it can affect your goals.

Let Riverbend Wealth Management Help You With Retirement Planning

By taking the time to understand the ins and outs of retirement planning, you’re already ahead of the game. Start planning now for your retirement.

Consistency is important – set aside money regularly and invest wisely. But retirement planning isn’t just about crunching numbers. It’s about picturing your ideal future and working towards it step by step. So get creative and stay committed.

Never stop exploring new ideas, setting aside funds for the future, and dreaming about your future. Your retirement plan can possibly be the compass guiding you to a better retirement. For more information or to work with experienced retirement and financial advisors, call Riverbend Wealth Management today. 

*Disclaimer: Investment advice offered through Stratos Wealth Advisors, L.L.C., a registered investment advisor. Riverbend Wealth Management and Stratos Wealth Advisors are separate entities. Investments involve risk including loss of principal and unless otherwise stated, are not guaranteed. Please consult with a qualified financial advisor, legal/and or tax professional before implementing any strategy discussed here. No client or prospective client should assume that any discussion serves as the receipt of, or a substitute for, personalized advice, or from any other investment professional. If you have questions regarding the information on this website, please consult with your financial advisor. No strategy assures success or protects against loss. The hypothetical examples herein are based on various assumptions and is therefore hypothetical in nature and are for informational purposes only.

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