Even if you’ve been investing for decades, the last five to ten years before you reach your retirement age are a crucial time for your retirement planning. The decisions you make in this period can determine whether or not you have enough money in your retirement savings to reach your goals. Ensure you’re addressing these key issues as you learn how to start retirement planning in Lancaster, OH and begin planning for your future.
How To Start Retirement Planning
As you near the time that you plan to retire, it’s important to ensure that you’ve set yourself up to reach your retirement goals. Before you set a date, make sure you’ve done the following.
Decide When You Can Realistically Retire
When you started saving, retirement probably seemed a long way off. Now that it’s on the horizon, you should reevaluate and make sure that you’ve been putting enough money in to cover what you expect to spend. In addition to the obvious costs, consider how medical care might impact your expenses. Although these aren’t easy questions to answer, once you have a general idea of your costs, you can use a retirement calculator to help figure out if you’re on track.
Determine When To Start Collecting Social Security
You probably already know that you can start collecting Social Security at age 62, but there are a lot of misconceptions about the program. If you’ve earned enough credits to qualify for Social Security benefits, then you can calculate an estimate of what you’ll receive.
Consider Your Mortgage
You might decide to retire before you’ve paid off some of your debts. In particular, you may generate more retirement savings by putting extra mortgage payments into investments with compound interest. Note that it’s almost always a bad idea to make an early withdrawal from your 401(k) or individual retirement account (IRA). Not only will you owe penalties and tax, but you also may get pushed into a higher income tax bracket due to the withdrawal.
Assess Any Student Loans
Another aspect to take a look at are any student loans you’ve taken out. Whether you have loans for yourself or your children, you’re not alone. Over 3 million Americans over 60-years-old have student debt. Unlike your mortgage, interest on these loans often isn’t tax-deductible. If you don’t plan to work until these loans are paid off, it’s best to discuss with a financial advisor to determine the best path forward.
Pay Down Any Other Debts
If you have any credit card debt, personal loans, or auto loans, make a plan to pay them off before you enter retirement. These types of debt don’t have any tax advantages. Rather than paying them off with your retirement savings, you’re likely better off delaying your retirement and working for a couple of extra years while letting your savings earn interest.
Stay on Track
If you have had periods of inconsistent contributions or haven’t taken advantage of employer matching contributions, it’s time to maximize your investment options. The good news is that once you reach the age of 50, you’re eligible for higher contribution limits to catch-up. These options include Roth IRAs, traditional IRAs, and employer-sponsored plans.
As you near your retirement age, it’s crucial to stay diligent about your personal finance. With so many moving pieces and decisions to be made, it can be highly beneficial to seek out the advice of a financial advisor during this period. Reach out to Royal Oak Financial Group for help reaching your retirement goals in Lancaster, OH.