There’s plenty of advice out there about retirement, whether it’s from professional advisors or financial experts or random people on the internet. But one of the best sources of information on retirement is retired people themselves. Here is some of their most helpful advice, in the hopes that you can take advantage of the things they learned through experience.
Start Saving Early!
In a recent survey by the non-profit Employee Benefit Research Institute, 70% of seniors said they wish they’d started saving earlier in life. It’s hard to think about retirement when you’re 25 years old and just starting out on your own. But there’s no more important decision you can make for your financial future than saving a little bit of your paycheck from the beginning of your career. How much you save each month matters less than how early you start, since the power of compounding interest balloons over time. Consider that a person who invests a set amount every year for ten years and then adds nothing to it for 30 years will still end up with more than a person who invests that same amount every year for 30 years, thanks to earning interest on top of their original interest.
Starting to save early also establishes great financial habits, including sticking to a budget and living within your means. You don’t have to live like a hermit or give up the things you enjoy, but you will have a major leg up on your peers when it comes to saving for the future.
Factor In Your Taxes
In that same survey, 48% said they hadn’t understood what their retirement tax situation would be in retirement, and 38% said they were paying different taxes than they expected. While you’re working, your wages are taxed — simple enough. But when you retire, you have several different taxable and untaxed income sources, including Social Security, retirement account distributions, and payments from pensions or annuities. To make matters even more complicated, exactly what’s taxed can vary from state to state.
The best way to understand your personal tax situation is to talk to an accountant or other tax professional who knows all the rules. They can help you decipher how much you can expect to pay in taxes every year, which is vital for making a budget. Until you know the income you’re working with, you won’t be able to plan your spending. Depend on the pros for this one.
Don’t Retire All At Once
Many retirees say that the transition from working full-time to suddenly not working at all can be jarring, like hitting a wall at full speed. It’s a big adjustment, both emotionally and financially. Employers will sometimes let you do a phased retirement, going down to 30 or 20 hours a week for a while before you retire fully. Some retirees choose to get a new part-time job to keep themselves sharp, whether in their area of expertise or in a new one that they find fun or challenging. Others become consultants when they retire, using their wealth of knowledge to advise the next generation while staying in the game themselves.
The benefits are many: you keep your mind active, you bring in extra income on top of your savings, and you get to choose how much you work. When you’re ready to retire completely — whether you’re 70 or 90 — you’ll have adjusted gradually from working life to retirement leisure. And you’ll have boosted your finances along the way.
For more financial advice on planning for and thriving in retirement, talk to the professionals at at Equity Financial Services Group and Equity Trust & Wealth Management can help. Get in touch with us today and we’ll give you all the tools you need to succeed in this new era of your life.