5 Pieces of Valuable Advice For People Retiring in 2017
While “start early” is the best advice that people can possibly follow when it comes to planning for retirement, this advice isn’t useful for those nearing the age of retirement.
People who are approaching retirement age in 2017 have undoubtedly seen multiple cycles of the stock market global economy as a whole. They understand the volatility the markets can bring. Worry consumes them as they transition from investing in the market to selling those investments to create a source of income during their retirement.
With this in mind, there are a few helpful tips that all who are nearing retirement age should follow in the coming years:
1. Remember That Expenses Will Change
When nearing retirement, people will need to budget for their daily, monthly, and annual expenses just as they had to during their younger years. They will need to account for the fact that expenses will change when compared to their younger years.
Many people had children and supported them for the better part of 20 to 30 years. If they no longer need to support their children, those expenses will certainly change. In addition, many people downsize when their kids move out and they are left as empty-nesters. This changes the amount of money they put into a home and real estate budget.
People need to adjust their budgets accordingly and plan for their current life expenses moving forward. Changes in expenses with the passing of time can have serious impacts on how people handle their investments as they approach the age of retirement.
2. Think About Taxes
Many people have used their investments to shield themselves from taxes or pay their taxes on the front end in the form of an IRA, Roth IRA, or even a 401(k) Plan. This minimizes the amount of income they would lose due to taxes.
These people need to think about this strategy once again. Remember that when selling investments, capital gains may be subject to the capital gains tax. In addition, remember that dividends and distributions are also subject to certain tax laws and regulations. Nobody wants to give more money to the IRS than they need to. Ensure this doesn’t happen through planning investments and investment withdrawals accordingly.
3. Transition High-Risk Investments Gradually Towards Safer Investments
A traditional mantra of retirement planning is that people should start to transition their more high-risk investments into more conservative investments as retirement nears. The economy tends to fluctuate in cycles and people who near retirement during a “down” cycle could end up losing a large amount of money. To prevent this from happening, gradually shift aggressive stock investments into more conservative bonds as retirement nears. This will lessen the risk without sacrificing major returns on investment.
4. Consider Your Sources Of Income
Many people have different versions of retirement. Some people will quit their day job while they remain working as a consultant. Other people want to stop working entirely and move to the beach.
People who stop working entirely need to consider the source of their income in retirement. Some people have saved up enough that they don’t need income at all and plan to live on capital gains for the rest of their life. Other people will look into high dividend paying stocks. Plan accordingly for the type of income that will be present.
5. Do Not Neglect Estate And Gift Taxes
As people start to approach retirement age, the estate tax begins to grow. This tax is also referred to by many as the death tax.
Obviously, most people would prefer that their estates would be passed down to their children and grandchildren instead of simply be handed off to the government. To prevent this from happening, everyone needs to think about the estate and gift tax and plan around these taxes accordingly. Don’t be surprised by the tax law after it’s too late.
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