7 Factors to Consider When Planning for Your Retirement

Author : Camputaro & Associates
Oct 15, 2018

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Nobody has ever complained about starting to plan for retirement too early. Even if you’re still decades away from leaving your career, it’s a good idea to make some plans for that phase of life. Most people underestimate how much they should be saving for retirement, but even more people just don’t think about it at all. Here are some factors to take into consideration when you’re building your retirement nest egg.

Housing

Where will you live when you retire? Most retirees have paid off their mortgage before they retire or will do so shortly thereafter. This minimizes housing costs to just utilities and property taxes. If you live in an expensive part of town, you may still consider downsizing to reduce your costs of living even more. On the other hand, if your retirement dreams include traveling around in an RV, you may be fine living in a small apartment instead. With renting, you also have the advantage that it’s easy to move – especially if you consider relocating to a senior community at some point.

Lifestyle

It doesn’t make sense to deprive yourself of everything now to finally live it up in your 60’s and 70’s. However, you don’t want to go back to a steady diet of Ramon noodles after you leave the workforce, either. Therefore, it’s a good idea to think about your ideal retirement lifestyle and the expenses that go with it. While you won’t have to worry about commuting costs, you may still want to plan vacations. Additionally, you’ll probably take up a new hobby or two to fill in the hours you previously spent working.

Retirement Age

How much money you need to comfortably retire depends on how much you plan on spending and at what age you’ll retire. There are many benefits to retiring later than earlier. For example, waiting to retire allows you to build up a bigger nest egg, and it reduces the number of capital withdrawals when you retire, too. That being said, you may choose to switch to part-time work before you fully retire. That decision may not help you stock your retirement fund, but it can help pay living expenses and postpone withdrawals for a few additional years.

Income/Investment Returns

It’s a good idea to estimate your future income and investment returns to help you figure out what retirement looks like. If you plan early enough, you can adjust your retirement contributions to achieve the results you want. Even if you start a little later, you can take advantage of catch-up contributions to stock up your savings. A financial planner is the best person to talk to about your retirement goals.

Paid Work

Many retirees return to part-time or full-time work after they have reached retirement age. Some just get bored sitting at home; others just don’t feel like quitting. If you’re in the right career and feel challenged by the job you have, there’s no reason to retire. You may also use retirement to pick a different career altogether. Naturally, any paid work you decide to do during retirement will help you cover your living expenses and reduce your need to withdraw from your retirement savings. If you plan on working past retirement age, you may not have to worry as much about building up a large retirement savings.

Taxes

Even retirees have to pay taxes. Most people don’t think about that when they estimate their income from various sources and living expenses. If you’ve been contributing to a tax-deferred retirement account, you can expect to pay income tax on those withdrawals when you retire. Most likely, you’ll be in a lower tax bracket with lower earnings, so deferring the taxes still makes sense for you now. Our accountants can help you figure out what to expect in terms of taxes after retirement if you need help with your planning.

Healthcare Expenses

One of the biggest expenses retirees have is their healthcare costs. If you don’t have access to good health insurance, you may spend a lot more on premiums, deductibles, and co-pays than you anticipate. While you can save money by choosing generic prescriptions and finding the best insurance plans for your needs, you probably shouldn’t neglect investing in your health in other ways, too. Small things like eating healthy, exercising, and reducing stress can help you feel more productive now and long after you have retired – allowing you to enjoy the fruits of your hard labor for many years to come.

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Camputaro and Associates
Certified Public Accounting Firm
136 N. Orchard Street, Suite 8
Ormond Beach, FL 32174
(386) 255-2511