Congratulations! This is a very wise question and a good start to a successful retirement plan. Today’s seniors can expect to live more in their retirement years. So with the help of a good financial advisor, one can develop his or her own strategy. Also one needs to talk with their loved ones before taking any life turning decisions. A few pointers are as follows:
Home Equity:
If in you are aged between 20-50 years, invest in buying a home today if you haven’t done that yet. This can be used in future to buy a reverse mortgage or can be simply liquidated for a substantial nest egg to fund your retirement. Tax breaks are always welcome.
Independent Retirement Accounts (IRAs) And Other Plans:
Begin Investing In These As Early As Possible.
These can be a good source of supplementary retirement income. Also one can decide not to touch them and keep them for unforeseen circumstances. One can also include them in their estate planning.
After the age of 70 and 1/2 years, one should remove a minimum required distribution from tax deferred plans to avoid inflated tax penalties. You only need to withdraw the money. You needn’t spend it. Invest wisely in other money churners.
Social Security Benefits:
Decide whether you want to cash them before your full retirement age of 67. If you start early, your benefit amount is permanently reduced. However, you would have got the benefit for a long time. On the other hand if you delay taking the benefits until your full retirement age, you can get a higher benefit. Also you would have earned more by then.
Employment Pension Plans:
Please request your employer to directly deposit the checks in your account so as to remove the risk of them getting lost in transition. They work in a work similar manner like the social security benefits. However it could take several weeks after you retire for the first payment to happen.
Use Of Credit Cards:
Try to get out of debt as soon as possible. This makes for a better credit rating and hence lower interest rates for any other emergency loans.
Viatical Settlement:
It is defined as the possibility to sell one’s life insurance policy to a third party to get a lump sum of 40 to 80% of the face value. The third party in turn gets the full amount when one dies.
Annuities:
Annuities can be purchased from financial institutions like insurance companies, banks etc. These are instruments which are bought with a principal amount and make payments monthly to the owner. These could be ‘immediate’ or ‘deferred’. Also one could go for ‘fixed’ annuities or ‘variable’ ones.
In immediate annuities as the name suggests, the payments begin immediately and continue for life. Thus if the payments are deferred to a later date, the annuity is termed deferred.
A fixed annuity makes fixed payments until the investor’s death and would guarantee the principal paid.
In variable annuities, the payments fluctuate, based on the market. One runs the risk of losing the original investment.
Your attitude to risk matters. Also one needs to read the financial literature before investing in any product. Buy a product only from a sales representative who has a license from your state’s insurance regulator.
Whatever be your strategy, do seek professional help in arriving at a decision whenever and wherever you wish to put your money in. That’s how you can sleep well and dream of a substantial retirement income.