Between the rising cost of living, skyrocketing healthcare costs, escalating college tuitions, increasing property values, and more, very few of us feel that we will accumulate enough money for retirement. These are three essential things you should do –– and the three ridiculous things you shouldn’t do (and can avoid) –– to help ensure that your golden years have a silver lining.
The Definite Do’s for Retirement Planning
1) Schedule ‘The Money Talk’ with Your Family
If retirement is within the next five years, this is the perfect time to have a real, candid, ongoing conversation with your family about retirement. Discuss when you’d like to retire. Think about where you’d like to live. Create a bucket list of what you want to see in your travels. But it all starts with the truth about money. Then take that discussion to a competent fiduciary financial advisor who has an established practice helping people step over the starting line of retirement. Just talking openly with your family will reduce anxiety and fears about running out of money when you’re in your 70’s or feeling guilty about how much or little you can pass on to loved ones.
2) Create the Cash Flow Plan Now
It’s easy to say that your money should outlive you, not the other way around. But that won’t happen through osmosis or magic. It happens with planning, patience and discipline over the long-term. You can map out your future spending by asking a truly qualified financial expert about a solid financial plan that includes your will, a living trust, and your legacy to future generations.
3) Make Your Life Less Taxing
In 1789, Benjamin Franklin wrote, “In this world nothing can be certain, except death and taxes.” Nothing has changed. You still have to pay taxes, and even if you prepare your returns, you should consult with an accountant who can work with your financial advisor in order to minimize how much tax you’ll have to pay each and every year.
The Absolute Dont’s for Retirement Planning
1) Don’t Bet on Winning the Lottery
Sure, it would be awesome to win the Mega Millions lottery or a cool billion in the Powerball, but don’t bank on it. Your odds of scoring the winning numbers are around 1 in 300 million. Even if you win, you’d have to pay about 50% of it back in taxes, so you’re only left with about $300 million. Even more reason to hire an excellent CPA.
2) An Inheritance is Not a Retirement Plan
If one or both of your parents have managed to save a small fortune, you may not inherit as much as you think you might. After all, approximately 92,000 Americans are now 100 or older these days. So with people living longer, and the cost of caring for a senior at home about $5,000 per month, you can see your potential inheritance shrinking with each successive year as your loved one needs higher, and more expensive, levels of care.
3) Don’t Expect to Live off Your Social Security Benefit
Social Security covers about a quarter to one third of a typical retiree’s monthly expenses. That helps but most people would probably find it painful if it were their only source of income. The Social Security system was established in 1935 by FDR as a safety net for American workers. Though over 69 million of us received Social Security or Supplemental Security Income, who knows how long it will last before it’s depleted or the government changes the rules on the payout. Right now, it’s expected to be depleted by the early 2030s because of long-term shortfalls. So if you’re a young investor, invest wisely for the future—and do so as soon as you can.
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