People are not in the work force forever, so it is very important to plan. A retirement plan is necessary. It is important to start a retirement plan as soon as possible. The more time money has to accumulate in investments, the more money an individual will have when they are ready to retire.
Retirement plans vary, depending on an individuals financial goals, lifestyle, and income. It is important for an individual to create a retirement plan that works for them. What’s good for me may not necessarily be good for someone else.
Budgeting is the key to successful retirement planning, and financial planning in general. This involves estimating retirement income, along with retirement expenses. This can be difficult. Most people would assume that they would spend less when they retire but this is not exactly the case. It is best for an individual to save more then what they think they need because expenses may decrease and others may increase. No one should ever assume that they will spend less when they retire.
According to BussinessWeek, longevity, healthcare, excess withdrawals and Social Security should all be analyzed when making a retirement plan. Prescription drugs and other medical costs are a perfect example. Young people usually have lower medical costs when compared to the elderly. There is no telling whether medical costs are going to rise or fall, but an increase in the cost of health care is more probable.
Life expectancy is very important when making plans for retirement. Life expectancy continues to increase, meaning that people will be in retirement for a longer period. This means that retirement will be more expensive. This has created a predicament for many older Americans.
There are many solutions to an increasing life expectancy. Individuals should definitely consider retiring later, or working part time. I plan on working as long as I can because I think work can be very fulfilling in many different ways. I plan to have a job that I enjoy. Otherwise, it may be difficult to continue going to a job for 30 to 40 years. When I do retire, I will definitely consider part time work if I do not have a considerable amount of money saved.
Before retiring, eliminate as many expenses as possible. Then can really reduce retirement expenses. Pay off houses, cars, and any other outstanding loans should all be considered. Paying off loans can give an individual a sense of stability. There are also other options. Keeping a mortgage during retirement can also be beneficial. Investing money in a 401K instead of prepaying a mortgage could save individual thousands of dollars. This can really reduce the cost of living. Other adjustments should also be made before retirement. Income usually decreases after retirement. People should consider reducing expenses a couple years before retirement in order to get use to living with less money.
Location is just as important as assets, when planning retirement. Recreational activities, cost of living, and safety are all things to consider. Certain aspects of location depend solely on the individual. This is precisely why it is important to think about these things before retirement.
There are many different ways to generate savings and income for retirement. IRA’s, 401 K’s, Social Security, pension, and savings accounts are excellent ways to generate funding for a comfortable retirement. It is very important for young people, like me, to understand all of these because they can be crucial to retirement.
Estate planning is just as important as retirement planning. Estate planning should usually occur prior to retirement, but it becomes increasing important once an individual is retired. Estate planning is important because it allows the individual to distribute their assets, and cover the debts if they die. The first step of estate planning is to do an asset inventory. It is important to make sure to include any asset that has an appreciable value.
This may not sound like a big deal, but if an individual dies without a will, the state divides assets for you. Having a will is crucial for any with a large amount of assets, or if an individual has many dependents. If someone works hard their entire life, and accumulates a lot of assets along the way, they should control where these assets go.
Estate planning is much bigger than having a will though. According to CNN Money, it is very important to consider the taxes involved when your assets are distributed. According to CNN, the estate tax is set to phase out by 2010. If new legislation isn’t set in place, then the tax will be reinstated in 2011. CNN also has many more suggestions. They argue that individuals shouldn’t leave all their assets to their spouse because it can be a burden. This could possibly increase their estate taxes because the sum will be larger. Instead, they suggest leaving more assets to children. This is definitely a good idea if the spouse has a considerable amount of assets. After 2010, assets over one million dollars will be taxed.
Generosity goes way beyond family members when an individual dies. If charities and foundations are important, then it is possible to leave money to these organizations, tax free after death. If giving is important to an individual, they never have to stop. Donating money to charities and foundations may appeal to those who don’t want as much of their money going towards taxes.
Estate and retirement planning are both very important. They both involve financial responsibility. Being financial responsible can be difficult, but it can also prevent a lot of unnecessary stress. It is so much easier to focus on the important things in life, like family and friends, when an individuals finances are in order. Both chapters go into detail about maintaining financial responsibility, whether it is by accumulating assets or creating legal documents.
It is very important to stay well informed about both issues. The economy continues to change, and there is no telling what can happen to it. Sources like Business Week, Forbes, and The Wall Street Journal can really help when making important decisions about finances. Increased taxes, inflation, new legislation, and the stock market can all have an effect on retirement and estate planning. There is no bullet proof retirement or estate plan, so consulting publications and professionals can be very beneficial.
