Countdown to retirement

October 21, 2020

Throughout your working life you’ve been preparing for retirement, and now the time has come—it’s the moment to think about how to handle it. Retiring means a significant change in your life, but good planning can help make the transition easier.

It’s not rocket science

Your income during retirement should cover your basic expenses: housing, food, utilities, taxes, insurance, transportation, and so on. If your mortgage is paid off, you still have to include maintenance costs and property taxes in your budget. Remember that in general, the cost of living increases over time, so you should include inflation in your projections.

Last, it would be ideal to have enough money to do everything you’d like to do during your retirement, like traveling, enjoying your hobbies, or even moving. Therefore, you need to consider those expenses in your plan.

How much money will be coming in?

After looking at your expenses, you need to think about where you’ll get the money to cover them. Make a list of all the sources of income you expect to have during your retirement, like pensions, a retirement plan, investments, IRAs, and Social Security. Then estimate how much you expect to obtain from each source. If you see that the money won’t cover all your needs, you should consider working for a longer time or finding another way to increase your income.

Take health into account

Health care expenses can affect a substantial portion of your budget during retirement, so it’s essential to plan for that eventuality. If your employer doesn’t offer a complete medical plan for its retired employees, you should consider purchasing a supplementary policy to cover the costs that Medicare doesn’t cover.

Your distribution plan

The earnings on your investments will be key while the money from those accounts lasts. And the percentage you designate to receive each month for your expenses can have a great impact. Too high a percentage can exhaust the money quickly, while a relatively conservative percentage can help ensure that your investment money lasts longer. You can make this change on the webpage, under the section My Retirement Analysis and the Results tab.

Take control

When you retire, handling the taxes that you’ll have to pay when you take money out of your accounts can help increase the funds available for your retirement. That will depend on the place where you keep your various types of assets and the order in which you withdraw them. Consider withdrawing money first from the accounts that pay taxes and leave the IRAs and qualified retirement plans as long as possible.

Balance your investments

If you’ve been an investor, the combination of cash, stocks, and bonds that you’ve kept in your portfolio all these years will affect the amount of money your investments yield. Although the ups and downs of the stock market are always a factor, if you invest too conservatively, it’s possible that the money your investments yield won’t be enough to meet your goals. Consider the possibility of investing a portion of your portfolio—even after retirement—in stocks in order to maximize the growth potential of your assets.

Each situation is unique, so before taking any action it’s a good idea to consult with a professional in the field.

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The information and general descriptions contained in this article are designed to help you understand about the factors that you should generally consider when evaluating the appropriateness to your retirement plan of any strategy or investment. Any descriptions herein are solely for informational and educational purposes and for your independent consideration; they are not intended to be regarded or construed as advice or a suggestion for you to take (or refrain from taking) a particular course of action. In providing this information, we assume that you are capable of evaluating the information and general descriptions contained herein and exercising your independent judgment. This document was prepared for informational purposes only and should not be considered as an advice of any kind. Banco Popular de Puerto Rico, its subsidiaries and/or affiliates are not engaged in rendering legal, accounting, or tax advice. Should legal, accounting, or tax advice be required, the services of a competent professional should be sought. Investment products are not insured by the FDIC, are not deposits or obligations of and are not guaranteed by Banco Popular de Puerto Rico or its subsidiaries or affiliates, and may lose value.