Retirement should be a time to enjoy life when you no longer have to work every day – but it…
Retirement should be a time to enjoy life when you no longer have to work every day – but it will not be if you do not make a plan for your financial security. Unfortunately, many people have big misconceptions about retirement that affect their ability to make the right plans.
Because you are not making an expensive mistake that affects your future, here are four important facts about retirement you need to know that you probably were not aware of.
Many financial experts recommend saving you about 70% to 80% of early retirement. In fact, there is even a rule called the 80% rule.
The problem is that not every pensioner spends less after leaving the labor force. In fact, the Labor Research Institute found that almost half of all older households actually exceeded early retirement expenditures over the two years after leaving the working world and nearly 33 percent exceeded early retirement expenses six years later.
Later that spent more than early retirement, not only exceeded their income by a little bit. Nearly 30% spent 1
20% more during their first two years of retirement than before leaving work, and almost the quarter still spent 120% more six years later.
If you base pension savings goals because your expenses will fall with a large margin after you leave the job, you will fall far if you do not lower costs. Now that you know there is a good chance that you spend more, aim to save enough to replace at least 100% of your early salary if you can.
When you talk about extra expenses at retirement, the big money you spend can not go against globetrotting or spoil grandchildren. Instead, spend more money than you expect will be spent on healthcare.
The calculations vary, but most experts agree that older couples need big savings – close to the middle of six digits – to afford their important care in retirement. And research from the nationwide nationwide revealed seniors who apply for social protection at 62 years can spend 64% of their entire social insurance coverage on medical expenses.
When major healthcare costs come as a surprise, financial disaster is the result. You do not want to waive the necessary care or have to choose between food and medicine, so start wasting money right now for medical care. Use a Health Requirements Account (HSA) if you can, or add additional funds to another tax benefit account earmarked for healthcare costs.
About three out of four adults plan to work earlier retirement age – at least part-time – according to a recent Gallup survey. But among current retirees, the average retirement age was actually 61, which is much younger than the age when current retirees plan to leave the labor force.
Why disconnect? Probably because no one plans to be forced out of work because of unemployment or illness – but the Center for Pension Research found health problems or involuntary unemployment were two important factors that lead to retirees retiring earlier than planned.
If you can not work for as long as you want, you have less time to save, and your savings must keep you longer. And if you do not have enough savings to live, you may need to apply for social security sooner than expected – which will permanently reduce your benefits.
Be prepared for involuntary early retirement by saving more money when you are young and healthy. Enter your retirement goals as if you have to leave the workforce at 62. If you are lucky enough to work longer, you get extra money to enjoy life more. And you will have the flexibility to choose to retire when you’re ready, rather than struggling to continue working out of financial necessity.
Establishing an appropriate pension saving objective is important because social benefits simply are not enough to provide a comfortable quality of life. Social security is only meant to replace about 40% of early retirement – not the 100% or more you need. Social insurance benefits will hardly keep you over the poverty level, and the purchasing power of benefits is enduring quickly, as the cost of living increases is not high enough.
You must have money outside social security and the chance is that it will need to come from savings. To make sure you have what you need, you need to spend 401 (k), IRA or other tax-saving savings account as soon as you can. Invest as much as you can through the entire year of work so that you are ready when you retire.
Now you know some important retirement facts that many Americans do not know. It is up to you to use your new knowledge to customize your pension savings plans so that you can be a financially secure senior. It’s worth doing the effort so your golden years are a fun time, not economic struggle. Start today.