Today, we're talking
about retirement. Specifically,
how much do I need to retire? Or
how much do you need to retire? The Employee Benefits Research Institute is a non-partisan research institute that focuses on
savings, health, retirement and economic security issues. Each year they conduct a
retirement confidence survey. The results of the 2015 study reveal a couple of disturbing
facts about retirement.In general, workers of today are slightly less likely to
have saved for retirementt, than workers from ten years ago. The retirement survey found that the decline in those who reported
saving for retirement, occurred more in adults younger than 55; specifically young adults aged 20 to 34. In 2014, 33% of workers claim that they plan to retire after the age of . Ten percent claim that they don't
plan to retire at all.
Well, even though you might be a little bit scared, I am going to help you save for retirement, so that yes, you can retire. And if you want, you can even
retire before the age of 65. It's just going to take some savvy saving and some savvy investing. Here are three questions that you need to ask yourself when wondering when you can retire.
Number 1, when would I
like to retire? Before you even start planning for the funds, figure out when you
want to retire. If you don't want to retire at the age of 65 , maybe you want to retire at the age of 50; maybe you're ready to retire at the age of 40.
The closer you are to the age that you want to retire, the more ambitious your saving and investing has to be. However, the closer you
get to retirement, the less risk you might be willing to take on, because you don't want all of your funds to be gone by the time you're ready to retire. I know that personally I really don't
want to retire at the age of sixty five. I'd much rather be retired by 40, 45 or 50. The idea is that I'd like to stop working for money at a certain age and allow it to work for me. Is this really retirement?
Probably not in the traditional sense, because I would still be working on my passive investments and just monitoring those, for example real estate is a great way to have
cash flow in retirement, or investments in stocks that throw off dividends. So these are ways I am
planning for my own retirement.
The second question you should ask yourself is
how much money do I need to retire? Now that you have a date and age when you're like to retire, you can start to work backwards into your
retirement income. Do you want to live on $1000 a month? Would you like to live on $2000 a month? Do you think you can get by on $750a month? It might seem a bit crazy, but it is possible.
There are plenty of people who retire overseas and live on incomes of $750 to $1000 a month. So your retirement might not be as far away as you think. Once you have an idea of the amount of monthly retirement income that you'd like, you can use a
retirement calculator to put in your current savings, your savings rate, for example how much you plan to continue saving, as well as the date that you plan to retire, and how long you'd like that retirement income to last.
Which brings us to question three, that you should ask yourself when you're wondering if you're ready to retire, which is, how long should my retirement savings last? Or how long do I want them to last? If you'd like your retirement savings to last about 25 years and you start out with about $20 000 you might be working for a little while before you can get to that.
Reduce Your Overall Taxes In Retirement
Now that you are retired and enjoying life, the last thing on your mind is likely to be your federal income tax. But there are still ways you can minimize the amount you owe each year. It's likely you receive monthly social security benefits.
But did you know that it is possible for the IRS to tax some of those payments. This only happens if the other income you receive is too high. Generally, if all your other income plus fifty percent of your social security benefits exceed a certain threshold for your filing status then you will end up paying some tax on your benefits.
If you do pay some income tax on those benefits, there are other things you can do to limit the impact of those taxes. One option is to find some tax-exempt investments to replace some of the taxable ones you own. This way you reduce your overall tax and can possibly keep your social security benefits in lower tax brackets.
An example of this type of investment is state and local municipal bonds. The interest you earn on those bonds are exempt from federal tax. And, in some cases it may also be exempt from state income tax.One other way to reduce your tax liability is by claiming the tax credit for the elderly and disabled.
As a young adult you might not be thinking about retirement right now, but it's very important to think about it while you're young. Its going to hurt your pocket less while you're younger, because you can contribute smaller amounts. The closer you
get to retirement the more you're going to have to contribute. So I am very glad that you came with me today to talk a little bit about retirement.
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