Do you wish that there was a list of what to do and what not to do in your retirement? I recently discovered an article from MorningStar.com written by Sheryl Rowling titled 8 Financial Do's and Don'ts for the 7-Figure Retirement, and I thought it would be perfect to share with my listeners. You'll learn several tips that you should consider when planning your retirement.
After we analyze the article’s do’s and don’ts, we’ll turn to Debbie’s question about taking Social Security early in order to protect beneficiaries.
Don’t retire too early. Retiring too early can be detrimental to both your psyche and your savings. If you have to retire early or sooner than expected, make sure that you retire to something rather than away from something. Creating a purpose in retirement can ensure that you don’t get bored. Boredom is a four-letter word in retirement.
For every year that you retire early, you have one less year of savings and one more year of spending. Do the math to learn what that could mean for your portfolio.
Do watch your taxable income level. This may sound odd, but it often makes sense to pay more taxes now in order to pay significantly less later. Retirement is one time in your life when you have control over the taxes you pay. Implementing careful tax planning strategies can save you over the course of your retirement.
Don’t take Social Security too early or too late. When to take Social Security is a complex question, and the answers vary depending on the individual. It’s usually best to wait until full retirement age to start taking benefits and it’s often even better to delay until age 70 especially if you’re married. Listen in to hear what I usually recommend to my clients.
Do consider Roth conversions. If you have the opportunity to convert your IRA to a Roth you should even though you must pay tax on the amount converted. Remember that since these are after-tax dollars, the income they provide is never taxed.
Do consider retirement stages and safe withdrawal rates when determining your budget. Spending more in the early years of retirement makes sense as long as you consider several factors. You’ll need to ensure that you have a safety net in place and that you have a plan to reduce your spending over time or whenever the market becomes uncooperative.
Don’t lock yourself into financial commitments or expensive payments. Long-term expenses like leasing a luxury car can lock you into financial commitments that you can’t free yourself from. Becoming the Bank of Mom and Dad can not only ruin your kids’ chances of financial independence, but it can also ruin your relationship and your own financial security in retirement.
Don’t write checks to charity. Instead of writing checks to charity, consider contributing appreciated stocks. This way of charitable giving can save you more in taxes. One way to utilize this strategy is by creating a donor-advised fund (DAF) which could be likened to a charitable IRA.
Do consult a financial professional. Obviously, I agree with this tip. Consider consulting a CPA as well as a financial advisor so that you can ensure that you are considering every angle in your retirement plan.
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