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Business // Thinking Smart
David S. Chang

Things To Plan For In Retirement

Being financially independent for retirement is one of the top goals for Americans. However, a recent study shows that half of Americans will die with almost no assets, and half of Americans will rely only on Social Security for income. With low asset levels, paying for unanticipated expenses and even raises in cost of living can be quite difficult.

Here are some important topics to consider that can help if you are nearing retirement:

1) Set up a financial plan. With people living longer, one of the greatest risks for someone nearing retirement is outliving their money. A financial plan can help you set up a monthly spending plan in retirement so you don’t overspend. This also can help you understand how much longer you may have to work and how much more money you may have to save. Planning now can prevent heartaches in the future. You can go online and Google “retirement calculator” to help plan.

2) When to take Social Security. You can start taking Social Security at 62 or wait up until 70 to max-imize Social Security income. Every year you hold off on taking Social Security means a higher amount of income you will receive. However, if you wait until age 70, you must live until 80 for the larger amount of income to make up for the postponed payments.

If postponing Social Security also means you have to take money from your savings and investments, it may make sense to take Social Security earlier so you have more principal to handle financial emergencies or take advantage of future investment opportunities. Taking Social Security earlier also may ease the transition into retirement, since you may be used to a regular paycheck. The check may not be as much, but the predictability can help start retirement off on the right foot.

3) Going debt-free. Generally speaking, it’s always better to have no debt. But paying down your mortgage completely is something you should discuss with your financial adviser or a professional. Paying off several hundred thousand dollars for a mortgage with your retirement principal may hurt your chances of paying for unexpected expenses in the future. Today’s interest rates are at an all-time low, and the loss of employment means you may not be able to qualify for a loan. And even if you can get a loan, chances are interest rates will be much higher than today. It is important to look at your overall retirement plan before making this decision.

4) Giving a little vs. leaving a lot. Some people will leave everything they have as an inheritance.

However, this may mean children are middle-aged or even themselves retired, and the grandchildren could be full-fledged adults. Giving a little now could be more helpful to your heirs earlier in their lives rather than receiving it several decades later. Also, you could witness your children and grandchildren enjoying the gifts you give them while lowering your tax liability by giving more now than waiting for it to accumulate.

Retirement is an important stage in everyone’s life, but smart decision-making and planning can help it be peaceful and stress-free!

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