1. When to Start Taking Social Security Benefits
The biggest retirement decision you will make is when to begin receiving Social Security benefits. More than 50% of Americans will rely on Social Security for more than 50% of their retirement income. Don’t think you have to start taking Social Security as soon as possible. If you are 62 and still working, your benefits will be subject to the earnings limit. Starting to take Social Security early may be one of the worst things you can do. Even if you retire from your regular job, don’t think you need to start taking Social Security immediately. When you factor in taxes, sometimes you can have more income after taxes by using funds from your individual retirement account in the early years of retirement and delaying the start date for your Social Security benefits.
2. When to Retire
Once you retire, it can be hard to regain momentum and return to the workforce if necessary. You should test the sustainability of your retirement income to ensure it holds up under less-than-ideal circumstances. Some questions to consider: How will I pay for health insurance if I’m not yet 65? If my savings and investments yield less, can I cut back on expenses? Am I willing to move to a smaller home at some point in the future? What will I do with my free time? Will it cost me money (travel, hobbies) or save me money (can I do repairs myself, cook at home)? Do I enjoy my job? Do I want to stop working? Should I consider phased retirement?
3. How to Maximize Your Retirement
If you work for a company that offers retirement, you should carefully study your options before retiring. Some questions to consider: If I work a few more years, will my pension increase significantly? Does my company offer a lump sum option or an annuity option? If the company offers that, which one should I choose? What retirement period should I select? Should I take a lump sum for my lifetime only, or take a slightly smaller amount that will also continue for my spouse’s lifetime (something called a joint and survivor option)?
4. How to Invest Your Retirement Funds
If you have money in a 401(k) plan, you may need to decide whether to leave it there or roll it into an individual retirement account. Some 401(k) plans offer great investment options and include updated plan documents that provide a variety of choices for your beneficiaries. Other plans may not be as suitable for retirees. Also, your 401(k) plan can change investment providers at any time, so you lose some control by leaving your money in the plan.
Note: The main advantage of a 401(k) is that you can manage the account without the help of a financial advisor because the plan choices are usually quite limited. You will need professional assistance in many cases for an individual retirement account, especially as you approach retirement.
You should invest retirement funds differently so that they are secure and produce reliable income. This is not the time to take big risks – a big mistake here, and you may find yourself in trouble.
Conclusion:
Such decisions often require consulting a financial professional. If you make the wrong choices now, it could negatively impact your financial security in the future. Finding a financial professional you trust may be the best decision you make for your financial well-being in the long term.
Source: https://www.thebalancemoney.com/big-retirement-decisions-2388805
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