Are you worried you won’t have enough money to fund your retirement? It’s understandable if this question is keeping you up at night. With all the excitement and freedom retirement brings, it can also include a high level of anxiety. Here are some suggestions to help you avoid running out of money when you’re no longer earning a regular paycheck:
Be strategic with investments
Just putting your money away for a rainy day is not enough to fund your retirement. You want the money you save to make money! And to do that, you need to consider investing your money into accounts or funds that generate substantial interest such as dividend stocks and government bonds, suggests Georgina Tzanetos, writer for Bankrate.com.
Plan and plan some more
The best way to prep for retirement is to make a plan that covers every possibility and projected expense. Your comprehensive plan should start well before you actually retire so you have enough time to save and put your retirement plan into action.
Some questions you should consider addressing in your plan include what income you would need to fulfill your retirement, whether you will have additional income sources in retirement, what the possible deficiencies in your income could be, and how will you fix them, advises Tony Drake, writer for Kiplinger.com.
He suggests talking with a financial professional to help create your plan and reviewing it regularly to make sure it will support you in retirement.
Reduce what you pay in taxes
Regular working hours and a paycheck may cease in retirement, but taxes and your responsibility to pay them do not. If you’re planning to pay your bills by withdrawing from your Social Security benefits or your company-sponsored retirement account, you need to realize those transactions are taxed and plan accordingly, according to Domenic Rizzi, also with Kiplinger.com.
“One fairly simple way to reduce your tax liabilities during retirement is to engage in strategic Roth IRA conversions between when you retire and when you need to begin taking required minimum distributions at age 72. This is a ‘sweet spot’ for Roth conversions because you will likely be in a lower tax bracket as long as you delay tapping your retirement accounts,” he adds.
Take advantage of your company’s retirement plan
If you work for a company that offers a company-sponsored retirement plan, make sure you activate automatic contributions. This is the first step in your retirement planning, according to Tzanetos.
“Even 2 or 3% of your monthly income contributed towards retirement can make a big impact,” she adds. “Setting up automatic contributions also eliminates the most difficult part of saving and investing — getting used to your monthly paycheck after withdrawing money intended for other goals.”
There are many things you can do to help ensure your retirement plan offers you the money you need to enjoy your time and pay your bills. It’s best to start planning as soon as possible for retirement, while you’re working, and consult with a financial professional. They can help you create a budget, plan, and help establish your investment portfolio, so your carefree years are also free from money woes.