Personal Finance After 50 For Dummies. Tyson MBA EricЧитать онлайн книгу.
retirement investments and strategies, and understanding retirement account rules
Chapter 1
Looking Ahead to Your Future
In This Chapter
From a young age, various adults in our lives tell us to plan ahead. Although it may be sunny and clear outside this morning, they tell us to take rain gear for this afternoon’s possible heavy rain. When packing for a day at the beach, they suggest sunscreen and money for lunch. And do your best in high school, they say, because your transcript will in part determine which colleges accept you.
Although some parents provide guidance to their children on the topic of long-term financial planning, most don’t because they aren’t sufficiently knowledgeable or are reluctant to explain these things to their kids. And therein lays a pretty significant problem concerning finances for your adult and especially later adult years.
And retirement has its own set of trials. Unexpected life events (such as a loss of a job, the death of a loved one, or a major medical problem) and economic challenges can throw a wrench in the best plans. The severe recession and stock market decline in the late 2000s – both of which were the worst in decades – highlighted other potential planning obstacles. Many near retirees and recent retirees caught off guard face the possible need to keep on working beyond typical retirement age, the need to reduce spending and make do with less (for example, one car rather than two), and the need to cope with diminished investment portfolios and declining home values.
These challenges can occur at any time during life, but they’re especially challenging when they happen when you’re in or near retirement. You have less time to make up for setbacks (and any mistakes you make) as you age. At some point in most folks’ lives, working longer or going back to work no longer are viable options. That’s why planning and regularly reviewing and re-evaluating your plans is essential.
We know many of you are reading this book having done little or no planning to this point. Don’t worry, though. It’s never too late to start planning. Studies of retirees show those who are most content in retirement are those who did some planning, even if it was a small amount. Planning is how you match your resources with your goals and expectations and identify where adjustments need to be made. Even if you’re already retired, planning now can improve the rest of your retirement.
This chapter discusses important themes that run throughout the book: the value of planning ahead and getting on the best path as soon as possible, the importance of taking personal responsibility, and the significance of taking a long-term perspective to make the most of your senior years. We also discuss how to keep the right focus to optimize your retirement planning.
Planning doesn’t sound fun, and for many people, it isn’t one of life’s most enjoyable activities. But nearly everyone values the benefits of proper planning: peace of mind, financial security, more options and choices, improved health, and a better lifestyle.
During your senior years you have many choices about different financial issues. You can change some of the decisions after you make them, but others can’t be altered. If you do decide to make adjustments, you have fewer years to benefit from the new choices. That’s why as you approach your senior years, planning your finances is more important than it was earlier in life.
In this section, we discuss the important issues that warrant your planning attention, explain why you should be the person to take the most responsibility for making that happen (even if you hire some help), and quantify the value of your taking our advice.
Identifying long-term planning issues
What’s on your mind (or should be on your mind) regarding your financial future? Consider how many of the issues in the following sections require long-term planning.
Choosing among an employer’s pension options
You need to look not just years but decades into the future to determine which pension option may best meet your needs and those of your loved ones. A pension is an employer-provided retirement benefit from money that your employer puts away on your behalf, wherein you receive a monthly payment based on your years of service and earnings. A pension typically is just one of several sources of retirement income you may have (the others typically being Social Security and personal savings including retirement accounts), so you must consider how these will fit together over many years.
Pensions (check out Chapter 7 for more info) differ from other sources of income, such as 401(k)s, IRAs, profit-sharing plans, and employee stock ownership plans (ESOPs), mainly in that only pensions guarantee you a fixed payment backed by your employer. With other types of retirement savings, the amount you receive in retirement depends on the amount you contribute and how you invest the account. See Chapter 5 for more info on other retirement accounts.
Leaving an employer and deciding what to do with your retirement account money
When you change jobs, get laid off, or retire, you often are faced with choices about when and how to withdraw money from retirement accounts – such as 401(k)s or 403(b)s – and minimizing the tax hit from doing so. Moving money is a decision you have to make today, but don’t make light of this decision because the decision affects how much money you’ll have in the decades to come.
Determining whether you can afford to retire and how much you can safely spend per year
To assess whether you can afford to retire and how much you’ll be able to spend after you do retire, you have to do some analysis relating to your spending habits and investing holdings and temperament. And, to be sure that you don’t run out of money or come close to running out of money, you also need to consider a wide range of scenarios for how your investments may perform in the years ahead. You can’t assume investments will return their historic averages each year. In fact, we’ve seen some stock indexes generate low returns or even negative returns over periods of a decade or more. See Part II for more information on each of these issues.
Deciding when to begin collecting Social Security
Deciding when to begin collecting your Social Security is a complicated decision that’s impacted by many factors, including tax laws, your earnings and your spouse’s earnings, marital status, and your health, among others. As we discuss in Chapter 10, you have to look years and decades ahead to make an appropriate and successful decision.
Considering a reverse mortgage
Reverse mortgages are becoming increasingly popular