Retiring is a fact of life and once you hit that point, which we all do, the idea is to enjoy your time. Ideally you have adequate resources and savings that will allow you the leisure that comes when you retire but it’s not always the case. It’s important to enjoy your time but it’s also likely that you’ll be faced with less income. When you were working you could depend on a steady income but with retirement and relaxation also comes a necessity to manage your personal finances in increase the impact of your dollar and savings.
Money management is the main driving goal during retirement and, for starters, it’s recommended that you withdraw 4 to 5 percent from your overall savings and no more than that. On average, people put money into various accounts like a 401(k), IRA, and if you’re lucky, a pension. Minimizing what you’re withdrawing is the key so you’re not faced with dwindling finances the older you get. Plan out what you have and factor in what you need to live on. This doesn’t mean you should live poorly, just wisely. There’s a lot of savings and retirement information on the web, like RetirementCalculator.com, that helps people with some of the myriad issues that come along with retirement.
You’ll also want to begin to minimize the taxes that are hitting you. Simply put, if you have money invested in a 401(k) or a traditional IRA, you have to pay taxes on the money when you withdraw it. more money you leave in you accounts, the more they will grow. With a lager balance your interest for that account will compound much faster. Now, eventually, you’ll have to withdraw the money but you want to minimize the hit you’ll take in taxes and waiting can often prove a very handy approach. This is why retirement planning is more than just thinking about putting money away for retirement. It’s also about managing that income in retirement so you don’t pay any unnecessary taxes.
Finding the right mix in your accounts isn’t impossible. If you think you’ll be withdrawing money at an earlier age then there are certain accounts that you should look at. Roth IRA’s, as stated above, are perfect for early withdraws. The difference with this type of IRA is that you’ve already paid all of the taxes on contributions. Everything was taken out when you put your money in so when it comes time to withdraw, you’re not caught off guard and hit with huge penalties and taxes.
Much of this information is about building your savings and having a low impact but it’s also important to note one of the worst mistakes retirees often make. It’s essential that you, under no circumstances, treat your 401(k) or other retirement accounts like it’s a savings account. Constant withdraws, penalties, and taxes will decimate your savings. Don’t touch it unless you absolutely need to and only withdraw after the account’s term limit.
Managing your money today is easier than every. With tools like the Internet and Retirement Apps that help you plan and manage your spending, you can have a much better idea of what you can and can’t afford. You want to stretch your money as far as you can and make the most from your retirement savings and accounts.
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Filed Under: Retirement
About the Author: Jeremy Vohwinkle is a Chartered Retirement Planning Counselor® and spent a few years working as a financial planner. Today, he helps people make the most of their money by writing about personal finance here and elsewhere on the web. Jeremy is also Coach at Adaptu and a regular contributor for other publications such as Intuit, and American Express. Be sure to follow Jeremy on Twitter or Google+.