by Fred Stoever
The first instinct for many people for whom retirement is on the horizon, is to relax. After all, isn’t that what retirement is all about? You’ve worked your entire adult life so that you can relax throughout your golden years.
However, retirement is not without its challenges, whether you’re retiring early, or late. Also, those who don’t have a specific retirement plan, may find it particularly difficult to comfortably retire. Investing for retirement is essential, because the monthly bills don’t stop, once you stop working.
In fact, they (the bills) often increase, and it is estimated that a couple that retires at age 65 will spend $160,000 in health care the remainder of their lives. Most alarmingly, that figure does not include any costs incurred by long-term care, such as a nursing home.
Saving for retirement is a must for those who want to make their post-working years as enjoyable as possible. Here are some tips to keep in mind as you begin to formulate your retirement plan…
(A) — Try to save 20% of your annual income. This is difficult, especially for those who are paying for children to attend college. If you can set aside that amount, place it into a bank account, and allow it to collect interest, you’ll have a nice foundation for your retirement plan by the time you actually retire.
(B) — Max out the contributions to your 401(k), IRA, and Roth IRA accounts. Those people younger than 50, can contribute up to $16,500 each year to their 401(k), and $5,000 to an IRA. Those older than 50, can chip in as much as $22,000 to their 401(k), and $6,000 to an IRA. Do the math, that’s a great way to save for retirement.
(C) — Invest in bonds. A good retirement plan is one in which 70% or more of an investment portfolio is tied up in bonds. Most bonds pay semiannual interest, which in turn creates a consistent income stream for retirees. Due to their very low default rates, municipal bonds issued by states, and cities, are the most reliable bonds in which to invest.
(D) — Since tax sheltered accounts such as IRAs do not require you to pay taxes on the interest in the accounts until you withdraw the funds, a great option is taxable municipal bonds. Taxable Municipal Bonds give you the safety of a municipal, but the yield of a taxable entity.
For most people, when they do eventually take out the funds from their tax sheltered accounts, they are retired and in a lower tax bracket, which results in their interest being taxed at a much lower rate.
(E) — The stock market has understandably scared off many investors, of all ages, since it obviously collapsed during The Great Recession (2007-2009), but those who have the ability to invest in blue-chip stocks should do so as part of saving for retirement.
Hanging on to such stocks for an extensive period of time provides security as well as, eventually, the opportunity to sell those stocks at a profit.
(F) — Know that it is never too early, nor too late, to embark upon a retirement plan. Obviously, the younger you start, the better off you’ll be in the long run. On the other hand, those who are in their 50s, or beyond, shouldn’t be intimidated by the size of the retirement task ahead of them.
Money is lost every single day by anyone who delays their own retirement planning, so procrastination is your enemy. Therefore, take time right now to ponder all of the tips above, and get in touch with your investment advisor today.
Stoever Glass & Co. Inc, has specialized in tax-free municipal bonds for high net-worth individuals, and investment advisors, for over 45 years.