Personal Finances - 2018


10 Necessary Steps to Richer Retirement

By Mo Vidwans

What follows are all practical but strong suggestions to build, preserve, secure and enrich your retirement. Most of us know these but only a few have the determination and the tenacity to make them happen. Dreams don't turn into reality on their own; there is no magic wand.

Realistic budget

A good foundation is necessary for anything to survive against all odds and for retirement good budgeting is essential. Not only must you be able to put away at least 10 percent (more if possible) of your take home pay but you also need to make sure that you have a good budget plan and that you follow it rigorously. This kind of discipline will take you a long way towards your goal. Take home pay implies that your automatic deductions like 401k, health and life insurance, and IRAs are already accounted for from your gross pay.

Review your retirement plan now

The most common question I get asked, especially from young folks, is “Why would I want to review my retirement plans now?" This implies that there is plenty of time to do that later; but sometimes later never comes. The biggest reason for doing it sooner than later is that you get a few chances to fix your course if you steer off it. The closer you get to your retirement you have fewer opportunities to correct your derailment. Granted you are making assumptions about your future expenses and income, expectations about what and how you wish to do things in retirement, inflation and similar items, but having a goal in front of you and a plan to achieve that goal is an absolute must.

Manage your investments

It is best if you manage your own investments but I understand that not all wish to or can do that. Regardless, it is essential that you know what exactly is happening with your investments; I cannot possibly overemphasize this particular aspect of investing. Too often, much leeway is given to the person who might be managing your assets, either by your negligence or their insistence and the end result may not be what you desired. Also, another fact to remember is that even in retirement you still need to invest for growth.

Minimize tax bite

There is never any point in paying taxes to Uncle Sam any more than we have to. Even with the new tax laws, there is still plenty of opportunity to legally minimize your taxes and it is always worth your time to review those prospects. It does not matter as to what tax bracket we are in, we can reduce our taxes legally if we take a long-term view of our investments and estate planning.

Get the best health coverage

Most of us who work, have health coverage through our workplace. Sometimes you do not have too many choices but if the workplace does offer high deductible HSA plans I would be inclined to grab it immediately. There are just so many advantages to having that plan. It is like opening another IRA and more.

Dream and plan how your time will utilize your retirement time

It is never too early to plan for your retirement, especially how to invest your time, skills and talents to some fruitful use. For most of us the retirement period is long and is getting longer. Start thinking about what you wish to do to fill your time and whether you have to acquire some new skills to do those things. There are many examples of professionals completely going into areas different from what they were doing when they were into their career activities. This is so because what you do in retirement is a passion that comes from the bottom of your heart and making money is not the objective.

Pump up your retirement plans

Sometimes, in spite of our best efforts and intentions, our retirement plans don't produce financial results as good as we expected. This is the time to review, regroup, rethink, redirect and double up your efforts. It is more possible to do this while you are still working; maybe we need to start saving a lot more, maybe some belt tightening is needed in other areas, maybe a second job or just putting your assets into higher growth areas is the key, if that would agree with your risk tolerance. If you need to, seek professional help to determine the validity of your plan.

Maximize your social security

Everybody knows that we need 40 quarters (or say 10 years) of full-time work to be fully vested in Social security. We have also heard or know or in fact sometimes are looking forward to the SS payments that can start at the age of 62. And in reality, many people do. That is usually not a good idea. To maximize your social security payments, you need to wait till 70 and that is always, barring some circumstances, the best path to follow. It seems like a bitter pill to swallow but if you have done a good planning of your financial life then that is the best answer. Social Security payments are generally not more than 20-30 percent of your total income stream, which means you have to have other sources of monthly income.

Manage your health

If you are able to keep your good health as long as possible, then you are on top of the world and you want to stay on that perch as long as you can. A successful retirement requires more than just money.

Live in a place you love

You want to find a place that makes you comfortable and you can enjoy. Where you have your dear friends and people you care for near you. Where there are hospitals that care for elderly and have alternative living options. Is there such a utopia somewhere? Maybe not but come as close as you can.

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Mo Vidwans is an independent, board certified financial planner. For details visit www.vidwansfinancial.com, call 984-888-0355 or write to mpvidwans@yahoo.com.