You’ve been preparing for retirement throughout your working years. And now that you’re close to retiring, it’s time to begin thinking about spending it. Retirement is a big life change. Planning ahead can help make the transition easier.
Not Rocket Science
Your retirement income will have to cover your basic living expenses, such as housing costs, food, utilities, taxes, insurance, transportation, and so on. By the time you retire, you may have paid off your mortgage and any home equity loans. However, you’ll still have to account for maintenance costs and property taxes in your budget. You’ll also want to have enough money for the things you would like to do in retirement, which might include traveling, pursuing hobbies, or maybe even relocating, so include those costs in your planning.
And remember that the cost of living generally rises over time, so don’t forget to factor inflation into your projections.
Now that you’ve thought about your expenses, you need to think about where the money will come from to pay them. Start by listing all projected sources of your retirement income, such as pensions, retirement plans, investments, individual retirement accounts (IRAs), and Social Security. Then estimate how much you can expect from each one. If there’s a shortfall, consider working longer or finding another way to increase your income.
The Health Care Galaxy
Health care costs can take a big chunk out of your retirement budget. So it’s essential to plan adequately. Unless your employer offers comprehensive retiree health insurance, you may want to consider purchasing a supplemental policy to pay costs that Medicare doesn’t cover.
Your Flight Plan
Your investments’ performance can affect how long your assets last. But the rate at which you withdraw assets from your accounts can also have a big impact. Choosing a rate that’s too high can quickly deplete your assets. Selecting a somewhat conservative withdrawal rate can help make your money last longer. You can make this change by login into popular.com/401K, going to My Retirement Analysis and selecting the Results tab.
Smart tax management can help increase the amount of money that’s available to you in retirement. Where you hold various types of assets and the order in which you withdraw them can affect the taxes you pay. Consider withdrawing money from taxable accounts first and leaving assets in tax-qualified retirement plans and IRAs for as long as possible.
Throughout your investing life, the mix of stocks, bonds, and cash you hold in your portfolio will have an impact on your investment returns. Although stock volatility is always an issue, investing too conservatively may keep you from earning returns that will help you reach your goals. Consider leaving a portion of your portfolio invested in stocks, even after retirement, to provide growth potential.
Your situation is unique, so be sure to consult a professional before taking action.
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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 of any strategy or investment in your retirement plan. Any descriptions herein are solely for informational and educational purposes and for your independent consideration; is not intended to be viewed or construed as an advice or as 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, are not guaranteed by Banco Popular de Puerto Rico, or its subsidiaries or affiliates, and may lose value. Insurance products are not insured by the FDIC, or other government agencies, are not deposits or obligations and are not guaranteed by the Bank, or its subsidiaries or affiliates. Some insurance products may lose value.