Are you investing with your self directed IRA and are wondering how your retirement is going to fair? Each persons different situation calls for different swears and different calls to action but regardless of the types of retirement accounts you have, whether it be a self directed IRA or 401k, SEP IRA or another retirement account you can benefit from planning for your retirement. Can you believe that we are talking about planning for retirement again? Don't we just keep talking about the same thing over and over again? Well, maybe. Yes, you should already know that the earlier you start saving for your retirement the better your retirement will be. Yes, you should know as well that you need to figure out how much money you will need when you actually retire and hopefully you know that there are plenty of retirement calculators out there that will help you figure those numbers out. If you don't know that yet check out, Is Your Retirement Plan Ready?
The before mentioned tips are some of the most talked about ways to help secure a financially secure and happy retirement. Because these are the most hashed out ways to improve your retirement we wanted to look at some other alternatives to improving our retirement. We thought we would give you some new less talked about ways to improve your retirement. There is no better way to do this than to get some information from some of the biggest names in retirement. The following tips come from a great article done by CNNMoney. They got some of the greatest minds on retirement to give them some great advice to help secure a great retirement. Let's jump into the article.
Forget the 4% Withdrawal Rule
Typically while in retirement professionals as a general rule suggest withdrawing 4% from your retirement account and as long as you adjust for inflation each year you should have enough money to last you 30 years. Historically this suggestion worked. According to Wade Pfau who is the professor of retirement income at American College suggests going away from the typical 4% withdrawal rule. Because the past 10-year Treasury recently only yielded 2.6%. If you were to have 1 million dollars and still withdrawal 4% you have a 57% chance you will run out of money. If you were change that percent to 3% you would have a 24% chance that you'd run out of money.
The idea here is take less from your retirement account each year if you can. It will hugely affect your ability have enough money throughout your retirement. If you simply can't take less than 4% look into saving more if possible. That way the amount of money you need to withdrawal will be less than 4% because you'll have more in your account.
As You Age Your Spending Will Decrease
David Blanchett from Morningstar suggests that as you age you will lower your spending. It make sense. You will have less dependencies and less things to worry about. Your children will typically be out on there own by now and you won't have to worry about most of their needs. He suggests that many planners and calculators assume you'll need at least 70 to 80 percent of your pre-retirement income to have a good retirement. Many times those simple tools can overestimate by as much as 20 percent how much you'll need for retirement.
For me the thing that I take from this is that knowing your true costs is crucial. I tend to want to overestimate costs so that I have a little safety net. I'd rather be safe than sorry. Figuring out your fixed and felxible yearly cost when you are close to your sixties will give you a better idea of your needs through your retirement but figuring out these costs each year is a wise decision.
All Things Health
The next advice is given by Carolyn McClanahan who is a financial planner and former ER doc. It can be super hard to know how long you'll live and even harder to figure out how healthy you will be. It is possible thought to get an idea of your overall health. If you typically have been healthy throughout your whole life with no major issues then you can guess that you should have a healthy retirement. More than likely as you age you will have some mishaps and there will be times when you have to fork out for medical expenses. Let's face it, the older and older you get your body doesn't work like it used too. You need to plan for these issues. Also, don't assume that since you are super healthy that you won't have or that you won't have to pay as much as others who are sick. Remember if you are super healthy you will more likely live longer and need money longer. Men who typically pay the average amount on prescriptions needs $122,000 saved by the time he retires. A women would need $139,000. Remember, this is the amount you'll need at retirement just for prescriptions and not the total amount he will pay. Other health care costs can add up.
Health care costs is one of the hardest to plan for. Again, doing whatever you can to get an idea is going to help you. Over preparedness is key!
Plan For The First Decade
Michael Kitches a financial planner suggests being open to moving your portfolio around. Don't have a specific way of investing. You may need to be heavier in stocks or heavier in bonds. The idea is to be open to switching it up. He also mentions the idea that if you can keep your portfolio in tact (not much loss) during the first decade then you will have a much bigger chance of making your money last.
Get The Best Deal With Social Security
The last bit of advice comes from Alicia Munnell who has been one of the nation's leading retirement researchers. The idea is fairly simple here. Those who were born between 1943 and 1954 have a full retirement age of 66 and those born after that time at 67. If you were to claim at 62 you would get 25% less than if you waited until 66. Just because it is called full retirement doesn't mean that you'll get the most benefit possible. You can defer until 70. If you were to wait until 70 you would receive 76% more than at 62. The longer you wait for your social security payout the more you'll be able to get. In the long term it makes a huge difference.
Do whatever you can to wait as long as possible for your payout. If holding out until 70 is possible then you will reap the benefits.
If you want more in-depth analysis or to read this complete article take a gander at Have Enough Money For The Retirement You Want
PHEW. We made it through some great advice here. Hopefully you have more ideas on how to rock it during retirement. For myself I'd rather do a little work now figuring out as much as possible about my retirement than having to worry about it when I actually do retire. Planning is crucial. At Accuplan we want you to have as much say in your retirement accounts as possible. We are always here to help you with self directed IRA rules. Feel free to contact us with questions pertaining to your retirement account and how we can help you invest it in the things you want.
Author: Nick Barker