Financial considerations in retirement

Theresa Howard - Extension News

When you read this article, I will have retired from 42 years with the Cooperative Extension Service in Harlan County. I will miss the people and the work greatly! So, I decided to make my last news article on retirement.

We hear a lot of financial advice about planning for retirement but receive less advice about what to do with our money once retirement sets in. If you are retired or will be soon, here are some tips to make your money go further.

Create a budget. Knowing how much money you have coming in and going out sounds so simplistic, but it is so important. Think about all your income sources. For many people this includes Social Security benefits, employer sponsored benefit plans and personal investments.

Then think about all of your monthly expenses. Expenses include those that are fixed like a mortgage or car payment and flexible like groceries and utilities. You may also want to think about occasional expenses, like birthday gifts or vacations that happen each year. Costs associated with new or continued hobbies may also fit into the occasional expenses category.

Spend your monthly income on paper. This will let you know whether you are on target. You may find, like many people have, that your retirement income isn’t enough or will not last as long as you had planned for it to. This could require you to reduce your spending in some areas or get a job to generate additional income.

If you have a spouse, it’s important that you go through the budgeting process together and communicate regularly about your goals for retirement and ways to meet them.

If you have additional income, being retired does not mean that you have to quit investing. Continuing to invest during retirement will help protect you against inflation — the rising cost of everyday living expenses like clothing and food, and help ensure your money lasts as long as you think it will. Many different investment options are available

to retirees, and as before retirement, what you invest in will depend on how comfortable you are with risk. Often the investments that carry the most risk are the ones with the most potential to have a really high rate of return. Talk with a financial adviser about your options and risk tolerance.

We all want to get the most out of our retirement, but financially that cannot be possible if we don’t start planning for it early in our careers. While retirement may seem like an eternity away for you, it will come sooner than you think.

Many older workers find this out the hard way, as they now plan to work longer than expected or not retire at all. According to a study from The Associated Press-NORC Center for Public Affairs Research, 55 percent of adults 50 years and older plan to work past the age of 65 or already have done so. Of those, almost two-thirds of them are doing so for financial reasons.

Starting a retirement plan early and reviewing it often can help you plan better for retirement. Most experts view retirement income as a three-legged stool with employer-sponsored retirement plans, Social Security and personal savings being the legs.

Social Security eligibility is based on your lifetime earnings record and your age. This requires you to meet work requirements yourself or to be married for at least 10 years to someone who meets the work requirements. Employed individuals who are married, widowed or divorced after at least 10 years of marriage are said to be dually entitled and can collect the higher amount between their own Social Security benefits or their spousal amount. You should understand that there are some ways your benefits can be reduced, including if you earn income after you have retired and/or you are between the age of 62 and full retirement age when you start receiving benefits.

Often the benefits from employer-sponsored retirement plans and Social Security aren’t enough to fully fund a retirement, so you’ll have to rely on personal savings and investments. To find out how much more you’ll need to retire comfortably, you can contact your local Social Security office to ask for a Request for Earnings and Benefit Statement and your human resources department for a pension estimate. This should give you a ballpark figure of what your retirement income will be from those two sources.

Personal savings rates are really low among Americans but there are ways you can boost your personal savings. Think about and write down what financial goals you have, such as saving for retirement, and put the goals someplace where you’ll see them every day, like on the refrigerator. Cut down on eating out for breakfast and lunch. Eating breakfast at home every morning could save you $3 to $5 a day. Over a year’s time, that adds up to a savings of $750 to $1,250.

Theresa Howard is the Harlan County extension agent for family and consumer sciences. Educational programs of the Kentucky Cooperative Extension serve all people regardless of race, color, age, sex, religion, disability or national origin.

Theresa Howard

Extension News

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