One of the biggest worries that prospective retirees have is running out of money. But, what most of those people don’t know is that there are options, lots of options to protect yourself, and have a prosperous and full retirement. Here are a couple strategies that help you.
A deferred annuity is similar to an IRA, in that you set up an account with a company who offers annuities, you will select variable rates, fixed rates, longevity annuity, etc. You hand over some or all of your savings into the annuity, and your annuity company then will write you a check every month to supplement your retirement income for the rest of your life. There are even more options inside that, you can setup your account so that you don’t see your annuity checks until you’ve reached a certain age, so that you never run out of money well into your retirement.
A retirement income plan
One of the first things to do when contemplating retirement is to develop a retirement income plan. This is where you need to envision how you see your retirement and what your savings will need to be in order to satisfy the lifestyle you desire. Many retirees spend the first ten years of their retirement traveling and taking advantage of their hobbies. Some retirees will also want to have the ability to help pay for their grandchildren’s education or help their own child purchase a home. These things all cost money and the pre-retiree will need to factor that into their retirement plan.
When we think retirement income it is important to think along the lines of pension funds. Pension funds are ideal for investing to produce income and preserve principal. When planning for a successful retirement, you ideally want to move from growth-type investments (a good choice for people in their 30s and 40s) to income producing investments (such as a self-directed IRA in real estate, or a startup). Income producing assets produce a steady stream of income, and while there is some opportunity for growth, you have peace of mind with your income, should the stock market take a dip.
Consider lower your taxes
Instead of looking at your investments first, begin by taking a look at your taxes and figure out the best way to minimize them. This is not “cheating”, but rather, making sure you are not paying more than you need to at tax time. For example, many people own mutual funds that unbeknownst to them, spin off distributions which cause them to pay taxes. By simply changing your portfolio’s funds to more tax efficient funds, these distributions won’t hit your taxes and negatively impact your bottom line, leaving more money in your retirement fund.
Figuring out how much money you will need to retire comfortably and whether you are on track (i.e. are you saving enough?) are two critical questions to ask in the planning process. You might want to consider joining forces with a trusted financial advisor who can deliver a complete picture of your assets and assist you with your retirement plan.
With these four strategies in place, you can maximize your retirement income and ensure that your retirement is designed the way you want it to be!