The old view of retirement planning has changed. Retiring at 60, going on trips, and not worrying about money are things of the past for most Americans. There are multiple reasons for this. We’re in the worst recession since the Depression, Social Security is bankrupt, and medical expenses are skyrocketing. So what can you expect now?
Let’s take a look at some of the new retirement planning rules that you should be aware of.
Kiss social security goodbye
If you’re counting on social security as part of your total retirement plan, think again. I recommend that all Americans completely ignore social security and plan for retirement assuming it won’t be there. However, if it is, then treat it like a bonus for retirement. The numbers speak for themselves. If you simply look at the age social security allows retirees to withdraw money, that age keeps getting bumped up. For example, if you were born in 1937, you were able to claim the full amount of social security at age 65. Today, If you were born in 1967 or later, you will have to wait until you are 67. See the pattern? With the way the economy is going and how the White House is spending, I could see this number go to 70 quite honestly. Instead of relying on social security, you really need to shift your focus to private accounts like Roth-IRAs and 401(k)’s.
Keeping track of taxes is critical
Minimizing your tax bill at retirement will be key. Who wants to give Uncle Sam more money than they have to? It’s important to understand how traditional 401(k) plans and IRAs work in terms of taxes. If you’re young, you might want to consider a Roth-IRA to minimize taxes at retirement. Understanding how your retirement accounts work is paramount to reduce your tax burden. The old rule of retirement was to not worry about taxes. Now, taxes are going to be one of you top expenses at retirement. Spacing out withdrawals and knowing proper timing is something every American needs to learn early on.
Don’t depend on your employer
With higher corporate taxes, and an added burden of the latest healthcare overhaul, many companies will be cutting back on retirement perks like 401(k) offerings and contribution matches. Employers are shifting the burden to the individual now. It’s no longer your employer taking care of you. Now it’s your personal responsibility to manage retirement funds. Currently, only 20% of private companies offer pensions plans and only 59% offer 401k plans. These numbers are pretty much guaranteed to get worse.
Longer retirements mean bigger expense
Thanks to breakthroughs in medical technology and medicine, American are living longer than ever today. Sure, that’s great, but how is that going to affect your financial plan for retirement? Well, it means you will need even more money in your retirement accounts. It sounds scary, but it really isn’t. As long as you do your due diligence and save on a regular basis, you will be fine. But, you should be aware of it. If you were born in 1946, the average retirement is 18 years. If you were born in 1980, the average retirement is 20 years. With these numbers trending up, your retirement expenses are going to trend upward also.
Call for action
After reading this, hopefully you feel a sense or urgency. It’s a good thing! Planning for retirement seems like an afterthought in most people’s lives these days, but you will pay a huge price by following the herd on this. Ignore the noise and what other people are doing and pay extra close attention to your retirement plan and future.
What are your thoughts?
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“It’s no longer your employer taking care of you. Now it’s your personal responsibility to manage retirement funds”
This is very well said, and sums up today’s retirement landscape. Anyone looking for their ship to come in had better get a reality check…there is no ship coming in to help you! Don’t rely on others, most certainly not an employer. We need to be self-reliant more than ever in terms of our own long-term financial future.
With higher corporate taxes, and an added burden of the latest healthcare overhaul, many companies will be cutting back on retirement perks like 401(k) offerings and contribution matches.