When it comes to your retirement, you want to be sure you can achieve the most successful outcome for your financial future. Whether you won’t be nearing retirement for a few decades or are coming close in a few years, it is important that you have a well-rounded plan for what you’re going to do when you reach that milestone. It is crucial to be financially strategic for your retirement so you will have the upper hand for any unexpected obstacles that may come your way and keep you from saving and investing as you should. To reach your goals, you need to be sure you know how much your retirement income will be and the steps you need to take to get there.
What is a Retirement Income Strategy?
Before you can navigate how your retirement can go, you need to be sure you have all the pieces to the puzzle before choosing your investments, policies, and savings. A retirement income strategy is how you can learn how to maximize your wealth during retirement. Since you are about to begin or have begun the process of saving for when you retire, you’ll need to know if your current plan will allow you to live stress-free when it comes to your money. There are several areas that your strategy will need to consider:
- Employer-Sponsored or Individual Retirement. You need to know which retirement accounts are right for you, such as a 401(k) or IRA.
- Healthcare. As your health declines with age, it is important to know you’ll have the means to afford adequate medical care. While you may not know what future health issues may occur, it is important to be aware of any pre-existing conditions you have and your current medical bills.
- Budgeting. It’s critical to look at how much money you will need monthly to be sure you can live within your means and keep accountability by sticking to an organized budget. This may need to be adjusted as needed, but you will be prepared by knowing how you’re going to live financially as a retiree.
- Guided Wealth Portfolio. Any stocks, bonds, or other investments you are managing should be considered for your retirement income.
- Tax Efficiency. Along with your investments, you should consider tax-efficient strategies now that can benefit you in the long-run to protect you from unknown variables like inflation and higher taxes.
- Real Estate. Do you have any personal or commercial properties that are generating a side income? If you plan to keep these once you retire, it is important to know how much money these estates are adding to your financial stability.
- Work During Retirement. While some people can’t wait to not work another day after retirement, this may not be the case for you. You might enjoy the slower pace overall, but you might still want to be involved in local business or serving a local charity. You may want to stay busy altogether and work a part-time job. No matter what you choose to do, it’s important to consider what take-home income any of these side hustles might bring.
- Social Security
All these things are the mile markers in the roadmap that will become your retirement income strategy. It is the way you’ll navigate the road to a financially stable and fun retirement. After knowing how you can live comfortably within your means, you can also project how much you need to save for meaningful activities like traveling, caring for grandchildren, or donating to a nonprofit.
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What Are the Benefits of Delaying Social Security Benefits for Retirees?
Social Security plays an influential role in your retirement income. The goal of Social Security is to provide money to retirees and disabled workers. These funds come from taxpayers, which the federal government allocates as needed. Your Social Security benefits will vary depending on your age and income. While the earliest you can claim your Social Security benefits is 62, there are many reasons why delaying them could help your overall wealth.
1. Protection from Inflation
Since delaying your benefits increases the amount you receive, it allows for you to have a cushion to protect yourself from inflation. As inflation continues to increase, having extra money from your Social Security can help you to be more prepared for higher expenses.
2. More Benefits
By postponing your benefits by 5-10 years, you can increase the amount of monthly benefits you receive since you didn’t open them early. Instead of a smaller amount spread out over a longer period of time, you’re increasing the amount you earn by receiving them in a shorter period of time.
3. Grow Other Assets
Instead of pulling from your savings and investments early, you are able to allow them to continue to grow.
4. Tax-Efficiency
By waiting to pull from your Social Security and utilizing other savings, you could possibly stay in a lower tax bracket and decrease your taxes overall.
How Can Life Insurance Policies Be Used in Retirement Planning?
As we near the end of our lives, we want to be sure our families are taken care of and are left with as little financial burdens as possible. A life insurance policy is provided through an insurance company that ensures financial security for your loved ones after your death. While no one likes to think about these types of situations when planning for your retirement, it is crucial to make proactive decisions for your beneficiaries’ well-being and financial stability. If you’re unsure why a life insurance policy is important for your retirement income strategy, here are some things to consider.
Protect Loved Ones
In the later years of our lives, we need to make sure our loved ones, whether it’s a spouse, children, or grandchildren, can have a dependable income if they are dependent on you for their financial security.
No Debts
While you’re caring for your finances now, it’s important to know what shape they’ll be in after your gone. Being aware of these policies can help you make sure all your debts are paid off.
Cash Value for Retirement Income
If you have a permanent life insurance policy, you could withdraw from these to use as cash value to add to your retirement income. These types of policies can be tax-deferred and brings diversification to your assets.
Continued Social Security
Having a life insurance policy in tact can ensure your loved ones will receive Social Security benefits, especially if you were their primary caregiver or financial provider.
Long-Term Healthcare
Healthcare needs like nursing homes, physical therapy, and hospice can be expensive and can be a significant financial concern for those who need around-the-clock medical services. Having a life insurance policy can protect you from paying too much out of your pocket during retirement for any health needs you or your family members may have. With the prices of nursing home range from $8,000 to $9,000 per month, it is important that you think about these costs in your retirement income strategy.
Estate Planning
Another aspect of life insurance policies is configuring estate planning. This is important for your plans during retirement, so you can know who your home and any other property will be given to after your death. Having a plan in place will clarify any unknowns about your intentions with your estate and assets for your beneficiaries.
How Can Real Estate Investments Supplement Retirement Income?
Real estate investing can be a key contributor to your retirement income strategy for building long-term wealth. Here are a few different types of real estate investments and how they can supplement your retirement income.
- Commercial Property (Offices, Warehouses, Retail). Using your business savvy for these types of real estate has the potential to provide high returns, especially by providing leases for long-term businesses.
- Vacation rentals. Let’s say you have a vacation home in Colorado, but you’re only able to visit a few times a year. This property provides a way for you to earn money by allowing others to rent when its not in use by you, your friends, or family.
- Land. Whether it’s 20 acres or 200, having land can be a fruitful investment that you can use for a variety of purposes, such as farming, events, or development.
All these real estate investments can be used for building your wealth by generating a consistent income outside of your usual Social Security benefits or 401(k). If you don’t currently own any property outside of your home and have means in your budget to purchase property, you might think about how using this type of investing to grow your financial stability, not only for yourself but for future generations.
When Should You Consider Consulting with a Financial Planner About Your Retirement Income Strategy?
You might be wondering, “When should I begin all of these steps?” The answer is now. No matter where you find yourself in your journey to retirement, it is important to begin working on your retirement income strategy sooner than later. This allows you to have more time to decide which goals are most important for you and your family.
Since there are so many facets of planning for retirement, it is essential that you receive the assistance you need to succeed. There are many financial planners and advisors who can answer your questions about saving, investing, and planning for retirement. Leaders Credit Union has a team of Investment Champions who would be happy to answer your questions about how to manage your finances. Keep in mind that your investments are not insured by the NCUA.
Formulate Your Retirement Income Strategy with Leaders Credit Union
Are you ready to strategize your money for retirement? Leaders Credit Union can help you navigate your questions and concerns for how you can and want to live as a retiree. Don’t hesitate to reach out to one of their financial champions. They would be happy to help you in your financial journey! Be sure to check out our free Deep Dive Into Investments Guide to learn more details about investing and how it impacts your financial future.
