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Retirement Planning Does Not Stop When You Retire


You’ve worked hard all your life, taken care of business financially, and now you’ve finally made it—you’re retired. Maybe it happened right on schedule, or perhaps your former employer accelerated your timetable, encouraging you to take an early retirement package. And maybe your nest egg’s just as big as you’d hoped—and maybe it isn’t. But whatever your situation, it’s not time to stop planning just yet. Taking stock now can help you make the most of the years to come. Here are four important questions to get you started.

What are your retirement resources? Not long ago, most retirees had two main sources of income—Social Security and a company pension. Now, it’s a lot more complicated. You may not even get a pension, and you almost certainly have a mélange of other taxable and tax-deferred accounts—traditional and Roth IRAs, 401(k)s, brokerage accounts, and annuities. Maybe you’re expecting an inheritance, or you get income from rental properties. Make a list of everything you have, and consider which are already throwing off cash and which could remain untapped for a while.

What will retirement really cost? You can expect your living expenses to change significantly when you retire. Some will almost certainly shrink. You’ve probably paid off your mortgage and gotten your kids through college. And work-related expenses will likely decrease. You won’t spend as much on clothes, commuting, and work lunches. You may even decide that you and your spouse can get along with one car. That could mean considerable savings on insurance, maintenance, and gas.

Meanwhile, though, other costs are equally likely to go up. Medical expenses, including the cost of insurance, often increase considerably during retirement. As employers cut back on health coverage in general—and for retirees in particular—you can expect these costs to continue to rise much faster than inflation. You might also want to buy long-term care insurance to cover possible nursing home stays. Home maintenance costs and property taxes also tend to spiral upward over time, unless you move to a smaller place or to a state with lower taxes. And you may pay higher utility bills if you spend more time at home.

When should you start collecting Social Security? Chances are, this won’t make up a large part of your retirement income. But as long as you paid into the system for at least 10 years, you’re eligible to begin collecting benefits when you turn 62. If you wait until you reach what the government defines as full retirement age—65 for anyone born before 1938, increasing gradually to 66 for those born in 1943, and then to 67 for people born in 1960 and later—you get the full amount to which you’re entitled, based on the total FICA taxes you and your employers paid. For every year after your full retirement age that you wait to collect, your benefit increases between 6.5% and 8%, depending on the year you were born.

But consider collecting as soon as you’re eligible. The longer you wait, the fewer years you’ll collect, and the longer you’ll have to live to make up for the delay. As you make this calculation, however, also keep in mind that some former employers count a portion of what you get from Social Security as part of your defined benefit and reduce your pension accordingly. This is known as an integrated pension plan. By law, though, an employer with this kind of plan can’t reduce your private pension by more than 50%.

Should you consider staying on the job? While some people still plan to stop working as soon as they’re eligible, increasing numbers of others decide to remain in the work force long past age 65, either because they enjoy what they do or they got a late start on saving for retirement and need to augment what they’ll receive from Social Security and their savings. There’s no financial penalty for continuing to work once you reach full retirement age. At that point, you can earn as much as you like and still receive your full Social Security income. But if you start taking Social Security payments early and continue to work, the amount you get from the government may be reduced.

In 2009, for example, you can earn up to $14,160 if you’re between 62 and 64, and up to $37,680 if you reach full retirement age during the year, and still receive your full benefit. Exceed those limits though, and your benefit drops—by $1 for every extra $2 you make through age 64. The year you reach full retirement age, you lose $1 for every $3 over the limit. But even here there’s a silver lining. As long as you’re working, you’ll contribute to Social Security—and the more you contribute, the more you will be eligible to collect.

 


This article was written by a professional financial journalist for Legend Financial Advisors, Inc. and is not intended as legal or investment advice.



INDEX
  • Five Retirement Questions To Answer
  • Live Longer And Prosper In Your Golden Years
  • 6 Ways To Close The Retirement Gap
  • IRS Closes Valuation Loopholes
  • Passing Down IRA Assets? Clue In Family Members
  • This Type Of Trust Is A Failure
  • Grandparents Can Become Big Spenders For Their Offspring
  • Time Your Social Security Benefits For Top Results
  • Watch Out For These 7 Retirement Ups And Downs
  • Why Would Anyone Take Their RMDs Sooner?
  • 10 Frequent Retirement Mistakes You Should Avoid
  • Tax Rewards For Year-End Generosity
  • Meeting With The Family For Elder Care Planning
  • 20 Questions On Required Minimum Distributions
  • Tie The Knot For Retirement With A Spousal IRA
  • Four Retirement Planning Rules Of Thumb To Bend
  • When Will New College Grads Be Able To Retire?
  • Last Chance To File-And-Suspend Retiree Benefits
  • You Know You're Getting Old When You Get RMD Notice
  • 10 Steps To Take On The Path To Early Retirement
  • How To REALLY Get Ready For Your Retirement Years
  • Can You Skip Over The Special Tax For Generation-Skipping?
  • What Do You Think Your Life Will Be Like In Retirement?
  • Raiding A Roth Early? No Woes
  • Live Long And Prosper: Roll Out A Stretch IRA
  • Did The Devil Make You Do It? 8 Retirement Miscues
  • Ponder These 4 Reasons For Roth IRA Conversions
  • 10 Ways To Skirt A Penalty Tax On Plan Payouts
  • Why Give Securities To Charity Instead Of Cash?
  • Will You Have To Lower Your Sights In Retirement?
  • What Will $2 Million Get You In Your Retirement?
  • Figuring Out How Much You Need In Retirement
  • Should You Borrow Against A Life Insurance Policy?
  • How Will Your Retirement Distributions Be Taxed?
  • Five Ways To Plan Smarter And For The Long Haul
  • 5 Withdrawal Strategies For Retirement Savings
  • Five Ways To Plan Smarter And For The Long Haul
  • Generation X Members Have Retirement Work Cut Out For Them
  • Booted From A 401(k)? Don't Despair
  • It's Tough To Decide If You Should Retire Early
  • Saving For Retirement At All Ages
  • Which Type Of IRA Do You Prefer?
  • Owning REIT Shares Can Help Minimize Risk
  • Roundup Of New Estate Tax Changes
  • Here Are A Dozen Part-Time Jobs For Older Americans
  • Two More Important Choices For Retirement Living
  • Will Your Retirement Assets Last?
  • The Benefits Of Working With An Advisor
  • Setting Up A Roth IRA Through The ''Back Door''
  • Eight Of The Best Tax Strategies To Use In 2012
  • 10 ''Baby Steps'' To Take If You Are Newly Widowed
  • A Case Study: Retirement Planning In Your Fifties
  • Factors In Researching An Assisted Living Facility
  • New Wrinkle In Pre-59 1/2 IRA Withdrawals
  • A Case Study: Giving Wealth Away
  • Social Security's Online Benefits Estimating Tool
  • Estate Tax Exemptions Survive Longer
  • Will New Estate Tax Rules Lull You Into Inaction?
  • The Fine Art Of Planning For Collectibles
  • Five Tips To Manage Your 401(k) Wisely
  • A Comprehensive Way To Save For Your Retirement
  • Key Factors In Conducting Your 401(k) Vendor Search
  • Assessing The Damage To Pre-Retiree Financial Plans
  • Where Have Vacation-Home Prices Dropped The Most?
  • Giving Up Control Of Your Finances
  • Estate Tax Purgatory: How To Extricate Yourself
  • Cheap Thrills: 10 Ways To Enjoy Life In A Recession
  • Adjusting To The New Reality About Your Retirement
  • What Should You Spend First During Retirement?
  • Retirement Planning Does Not Stop When You Retire
  • Part-Time Job Hunting Tips for Retirees
  • Weighing The Benefits Of Investing In A Roth 401(k)
  • Keep A Leash On Part Of Your Estate
  • Pre-Retirees, Retirees Switch To Roth IRA
  • The Obama Bank Plan And The Risks It Poses
  • New Law Suspends RMDs For Just One Year
  • The Importance Of Year-Round Tax Planning
  • Charitable Giving Rules Changed By Pension Act
  • Market Gyrations Raise Questions For Pre-Retirees
  • Passing More Than Money To Your Heirs
  • How Many Years Should You Retain Your Tax Records?
  • Key Questions For Those Nearing Retirement
  • Retirement Planning Does Not Stop When You Retire
  • Dealing With Market Risk Right After Retirement
  • Nine Estate Planning Mistakes To Avoid
  • Family Foundation Lets You Do Good For Others And Yourself
  • Treating Your Retirement As A Liability
  • Beware Of Social Security Identity Theft
  • Regulatory Guidelines Update
  • Understanding the Importance of a Fiduciary Standard
  • Don't Forget About Roth 401(k)
  • Free Credit Reports Available Online
  • Energy Systems Scale and Timeline
  • The Oil Patch Profit Squeeze
  • Timber As A Liquid Investment
  • Timber Facts
  • Ethanol: Salvation or Panacea?
  • Timber Facts
  • Emerging Market Food Consumption Growth Equals Rising Prices
  • Bank Loan Funds - A Primer
  • A Primer On Managed Futures
  • REITS: A Very Good Portfolio Diversifier, But Should You Invest In Them?
  • Does Investing Internationally Still Diversify Your Portfolio?
  • Another Way To View The Current Valuation Of REIT Sector
  • Understanding Risk-Preparing For The Unseen
  • A Critical View Of The Consumer Price Index
  • What Is Shorting Expense?
  • How Dangerous Is A Dollar Crash?
  • How Volatile Can The Stock Market Be?
  • GMO 7-Year Asset Class Return Forecast Is Bleak
  • Too Many ''Phish'' In The Sea
  • The Case For Industrial Metals
  • Identity Theft In The New Year
  • Ways To Improve The Score
  • Know The Score
  • Total Credit Market Debt (All Sectors) As % Of U.S. GDP
  • To Reinvest Or Not To Reinvest
  • Why Not Alternative Fixed Income Investments?
  • Just How Expensive Is The Market?
  • Beware of Brokerage Firms' Misconduct
  • Identity Theft : Correct Those Credit Reporting Errors
  • Risk-Controlled Investing
  • Q & A With Robert Arnott
  • Identity Theft : Applying For Credit? Better Check Your Credit Report First
  • Indentity Theft: Help Is On Its Way
  • Identity Theft: Everyday Prevention
  • Indentity Theft: Tips to Protect Yourself
  • Identity Theft : Tips to Protect Yourself
  • Identity Theft: A Note About Social Security Numbers
  • Identity Theft: Which Documents Should You Shred or Store?
  • Identity Theft : Don't Fall For That E-Mail!
  • Identity Theft : One More Reason To Protect Your Credit
  • What Do Rising Interest Rates Mean For Money Market Yields?
  • Exit Gracefully: How Business Owners Should Plan For A Comfortable Retirement
  • Section 529 Plans Are Popular But Not The Only Way To Go
  • The Importance Of Commodities In A Portfolio
  • A Tale Of Two Hedges
  • Bank Loan Funds: A Great Fixed Income Investment As Interest Rates Rise
  • REITs: A Great Diversification Investment
  • What Is Risk?
  • How To Find A Great Financial Advisor?
  • Is It Time To Find A New Financial Advisor?
  • Year-End Tax Planning Can Help Generate High Return On Investment
  • 4 Steps To A More Secure Investment Portfolio For Your Retirement
  • Traditional Investing May Decrease Your Retirement Lifestyle
  • Is Your 401(k) Plan A Failure?
  • Understanding Deflation
  • Tax Issues To Consider When Buying A Long-Term-Care Policy
  • Evaluating The Quality Of A Company's Earnings
  • Investing In Times Of Uncertainty And Risk: The Importance Of Diversification
  • Yesterday's Great Companies
  • A Retirement Plan Primer After The 2001 Tax Act
  • Beware Of Common Home Repair Scams
  • Estate Taxes To Be Reduced Then Repealed In 2010
  • Faulty IRA Conversions Can Lead To Tax Penalties
  • Many Individuals Pay Private Mortgage Insurance Beyond When It Is Necessary
  • Rethinking Estate Planning
  • Early Retirement Incentives For Tenured Faculty Waives Fica Tax Payment
  • Retirement Plan Contribution Limit Changes
  • Shopping For A Bank Account That Pays The Highest Possible Rate Of Interest
  • Your Medical File Report May Need A Check-Up
  • Do It Yourself Tax Preparers Watch Out: Tax Answers From IRS Centers Oftentimes Are Incorrect And/Or Insufficient
  • Five Tips For Preventing Thefts From Your Checking Account
  • Home Office Deductions: Hoops To Jump Through
  • Income Tax Effect On Single And Married Taxpayers
  • Income Tax Planning For Investments
  • Property Tax Challenges Should Not Be Overlooked
  • The IRS Will Follow Your Wealth To The Ends Of The Earth
  • Under New Law Taking Social Security at 65 Makes Sense for Most
  • When Do You Need Life Insurance
  • Year-End Tax Defferal Planning



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