5 Strategies for an Outstanding Retirement
You’ll likely spend approximately one-third of your life living out your retirement years so you want it to be a great experience. Having no money or little income is not my idea of a pleasant experience. Here are five strategies to help boost your retirement income:
- Trifecta Investing Strategy. If you fall into the twenty, thirty or forty-year-old age group, this strategy is for you. When most people think of saving for retirement, 401ks and IRAs typically come to mind because of the income tax deduction you receive for your contribution. It’s true that qualified retirement plans are one of the very best ways to accumulate wealth, not only because of the tax deduction, but also because your money grows tax free until you withdraw money during retirement. And that’s when the problem begins. If your entire retirement is built around qualified retirement plans, you significantly limit flexibility regarding income tax planning. A better strategy is to accumulate money in different types of retirement ‘buckets’. If, in addition to your qualified retirement bucket where withdrawals are taxed as ordinary income, you also had money invested in a personal investment (after tax) bucket, during retirement, you get to choose which bucket to draw from in a given tax year. Depending on the cost basis of the securities in this bucket, withdrawals may be non-taxable, subject to the lower long-term capital gains rates or potentially a loss that can be used to offset ordinary income. Even better is to add a third bucket, the Roth IRA. Here, withdrawals are tax-free. We have one client where we’ve avoided paying virtually any income taxes for more than ten years!
- Downsize your home. One of the best ways to improve your retirement income is to move into a smaller less expensive home. Our number one goal is to have the client downsize so as to eliminate any mortgages while choosing a lower maintenance home, allowing them to win twice by eliminating mortgage payments and reducing expenses. Even better is if they can downsize and retrieve some equity from their old home that can be used to add to their personal investment bucket.
- Home bonus strategy. A reverse mortgage can be an excellent strategy for someone who would like to maximize retirement monthly cash flow. With a reverse mortgage, the mortgage company guarantees you a monthly income for as long as you live in your home. If the value of your home drops below the mortgage amount, they take that risk and neither you nor your heirs will owe the mortgage company money at the ultimate disposition of your home. Note that there are other reverse mortgage options as well.
- Work longer; start a new career. Retirement is overrated! If you can find something you love doing during retirement this is the best choice for a lot of people. Understand that a little bit of money goes a long way for retirees. What could you do that would be loads of fun and make you some money?
- Choose your Social Security strategy. Give serious thought to when you begin receiving Social Security benefits. Generally, the poorer your health, the sooner you’ll want to begin taking your benefit. For those folks with great health, delaying benefits until age seventy can significantly boost lifetime benefits, particularly if you have a spouse. At the death of the higher-earning spouse, the lower-earning spouse steps in to the higher-earning spouse’s place to continue reaping those big payout benefits.
Ultimate Fitness Quest status report: OK, I had a set-back last week (week #2). My goal is to lose 15 pounds of body fat in thirty days. For week one, I lost 5.8 pounds. Then last week, I gained 2.6 pounds! And I thought I did everything right but obviously I didn’t. It’s a good lesson in goal-setting. The road to success in achieving goals is littered with potholes and roadblocks. What defines you is how you handle the obstacles. If you’d like to follow my fight to get back on track or you’d like to challenge yourself to lose a few pounds before summer, join me at www.UltimateFitnessQuest.com or on Facebook.