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9 Retirement Questions to Ask as You Plan to Retire

Nearing your retirement age is an important time to contemplate the decisions to be made in order to maintain your preferred lifestyle post-retirement. All the elements to be considered during retirement planning raises a lot of questions regarding the subject. Below are some of the top retirement questions that are frequently asked during the planning process.

1. When should you retire?

This is a top tier question asked by those who seriously plan for their retirement in earnest for whatever the reason, and the answer is one should retire when they possess the resources needed to afford leaving the workforce. There are, however, some stipulations that come with choosing this option in the first place. In some organizations, many employees have to have worked 20 to 30 years to be eligible to receive company pensions

2. How much money is needed in order to retire?

There are various factors that go into this part of retirement planning. You have to consider how much your pension is compensating you, your monthly expenses, how old you are at retirement, and how long you live. Everyone got different circumstances and lives, so it is important to seek the help of a financial advisor to determine how much finances are needed in preparation for this next stage of life. Financial advisors utilize your spending habits, life expectancy, and estimated inflation rates as informative determinants of how much that person will need when they retire.

3. Where does your retirement income usually come from?

The finances that go into your retirement income are usually sourced from your personal savings and investments, earned income, company pension benefits, private outside pension benefits, etc.

4. What percentage of your final working earnings will you need in your retirement income planning?

Retirement planning resources suggest 66% to 75% of final earnings as a “rule of thumb.” However, many people have to adjust to a 1/4 to 1/3 drop in their income. It is recommended that as you near retirement to make a monthly “needs” budget based on past spending, this can be done through reviewing your check register for the previous year, and combining it with a “wants” list pertaining to the luxuries you wish to enjoy such as travel, golf, entertainment, gifts, etc. This helps you have a better focus on your income goal rather than just determining your expenses off of your final year’s salary.

5. How much savings should you accumulate before retirement?

You must strive to save as much as you can during the period that you are part of the workforce leading up to your retirement. Save around 10-15% of your annual income during your career. It is advised to begin this process in your 20s and continue throughout the next 35-40 years.

6. How do you spend your retirement savings?

When you’ve spent your entire career making contributions to your savings, you can easily get lost when it’s over and it’s time to retire and manage these finances. You can withdraw money in a couple of ways; you can either take out a lump sum whenever large expenses come up, or you can set up periodic transfers to a checking account. Withdrawing money from retirement accounts can result in taxable income, so it is advised to consult with a financial advisor to guide you through process.

7. Should you take your pension as a lump sum or an annuity?

This a question best answered by a financial advisor. A lump sum seems like quite an attractive option, but it does come with significant tax consequences. Annual payments are likely to spread out through the tax load.

8. Is healthcare costly during retirement?

Healthcare costs are usually taken care of by the employer during the time that you are working. You become responsible for these costs when you retire. Healthcare costs are complex and costs are likely rise as you age. Consulting a financial advisor can help you determine initial costs like copays, premiums, vision and dental care, etc., though potential long-term costs are more difficult to predict.

9. What kind of investments are recommended to retirees?

An investor’s individual need for income, growth of income, safety of principal and liquidity should be considered when looking at investment options. Investments should be recommended to a retiree only after careful research and planning. In general, however, many retirees have the need for three kinds of investments: short term investments like Money Market Investments, CDs and Treasury Bills are useful in meeting needs for cash within the short term. Fixed income investments like municipal and government bonds can meet intermediate needs for income, for periods beyond a year but not more than 8 to 10 years. Long-term investments like real estate and stocks can be used to potentially increase a portfolio and the income it produces in years to come.

Similar article: 6 Estate Planning Tips for Your Retirement

Conclusion

The retirement planning process can be overwhelming to a lot of people, however, consulting a financial advisor helps ensure you are taken care of during retirement. Even though the questions above are the most common retirement questions, they aren’t the only things to consider during the retirement planning process. As you start preparing for your retirement, contemplate financial questions to ask a retirement planner that personally cater to your needs and goals.

Nearing your retirement age is an important time to contemplate the decisions to be made in order to maintain your preferred lifestyle post-retirement. All the elements to be considered during retirement planning raises a lot of questions regarding the subject. Below are some of the top retirement questions that are frequently asked during the planning process.

1. When should you retire?

This is a top tier question asked by those who seriously plan for their retirement in earnest for whatever the reason, and the answer is one should retire when they possess the resources needed to afford leaving the workforce. There are, however, some stipulations that come with choosing this option in the first place. In some organizations, many employees have to have worked 20 to 30 years to be eligible to receive company pensions

2. How much money is needed in order to retire?

There are various factors that go into this part of retirement planning. You have to consider how much your pension is compensating you, your monthly expenses, how old you are at retirement, and how long you live. Everyone got different circumstances and lives, so it is important to seek the help of a financial advisor to determine how much finances are needed in preparation for this next stage of life. Financial advisors utilize your spending habits, life expectancy, and estimated inflation rates as informative determinants of how much that person will need when they retire.

3. Where does your retirement income usually come from?

The finances that go into your retirement income are usually sourced from your personal savings and investments, earned income, company pension benefits, private outside pension benefits, etc.

4. What percentage of your final working earnings will you need in your retirement income planning?

Retirement planning resources suggest 66% to 75% of final earnings as a “rule of thumb.” However, many people have to adjust to a 1/4 to 1/3 drop in their income. It is recommended that as you near retirement to make a monthly “needs” budget based on past spending, this can be done through reviewing your check register for the previous year, and combining it with a “wants” list pertaining to the luxuries you wish to enjoy such as travel, golf, entertainment, gifts, etc. This helps you have a better focus on your income goal rather than just determining your expenses off of your final year’s salary.

5. How much savings should you accumulate before retirement?

You must strive to save as much as you can during the period that you are part of the workforce leading up to your retirement. Save around 10-15% of your annual income during your career. It is advised to begin this process in your 20s and continue throughout the next 35-40 years.

6. How do you spend your retirement savings?

When you’ve spent your entire career making contributions to your savings, you can easily get lost when it’s over and it’s time to retire and manage these finances. You can withdraw money in a couple of ways; you can either take out a lump sum whenever large expenses come up, or you can set up periodic transfers to a checking account. Withdrawing money from retirement accounts can result in taxable income, so it is advised to consult with a financial advisor to guide you through process.

7. Should you take your pension as a lump sum or an annuity?

This a question best answered by a financial advisor. A lump sum seems like quite an attractive option, but it does come with significant tax consequences. Annual payments are likely to spread out through the tax load.

8. Is healthcare costly during retirement?

Healthcare costs are usually taken care of by the employer during the time that you are working. You become responsible for these costs when you retire. Healthcare costs are complex and costs are likely rise as you age. Consulting a financial advisor can help you determine initial costs like copays, premiums, vision and dental care, etc., though potential long-term costs are more difficult to predict.

9. What kind of investments are recommended to retirees?

An investor’s individual need for income, growth of income, safety of principal and liquidity should be considered when looking at investment options. Investments should be recommended to a retiree only after careful research and planning. In general, however, many retirees have the need for three kinds of investments: short term investments like Money Market Investments, CDs and Treasury Bills are useful in meeting needs for cash within the short term. Fixed income investments like municipal and government bonds can meet intermediate needs for income, for periods beyond a year but not more than 8 to 10 years. Long-term investments like real estate and stocks can be used to potentially increase a portfolio and the income it produces in years to come.

Similar article: 6 Estate Planning Tips for Your Retirement

Conclusion

The retirement planning process can be overwhelming to a lot of people, however, consulting a financial advisor helps ensure you are taken care of during retirement. Even though the questions above are the most common retirement questions, they aren’t the only things to consider during the retirement planning process. As you start preparing for your retirement, contemplate financial questions to ask a retirement planner that personally cater to your needs and goals.

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