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5 Things You Can Do Now to Make Retirement Easier – The Motley Fool

According to a recent Gallup poll, 46% of Americans say they will not have enough money in retirement. In the meantime, almost every fifth American over the age of 65 works because he can not afford to retire.

The burden of saving enough money to continue living in retirement is very important to us today, so it's wise to start preparing for retirement as soon as possible. Here are five things you can do now to make your retirement easier and more enjoyable.

  Yellow road sign asking what you plan for your retirement

Image source: Getty Images

1. Make a plan!

First things first: You need a plan of how much income you need in retirement and how to get it.

You can begin to estimate how much income you need each year to retire – and be careful if you encounter unexpected expenses or your estimates turn out to be too rosy. Consider your various sources of income, such as social security or retirement income, and then see how much income you need to earn yourself. For example, the average annual social security benefit has been about $ 17,000 (US $ 1,413 per month) lately, and you can estimate how much you can expect from social security by setting up a "My Social Security" account , If you think you need $ 50,000 a year in retirement, and you get $ 20,000 from social security, then you need to find out where the other $ 30,000 come from.

You can imagine how big a nest egg must be to generate the desired income. You can use the imperfect but still helpful 4% rule, which provides that you pay out 4% of your nest egg in your first year of retirement, then adjust that amount for inflation in the following years. To be more conservative, you could plan to start the withdrawal of 3.5%. If you reverse the rule, calculate the nest egg you need to generate the income you need: Multiply your required annual income by 25 to get your savings target, assuming a 4% payout, or multiply 28.5 if you use a 3.5% initial payout. For example, if you need to earn $ 30,000 in income, you'll need to save $ 750,000 by using the 4% payout and $ 855,000 payout with a payout of 3.5%.

You can use this simple online calculator to help with planning. You can enter your expected investment growth rate in the Interest Rate field and then try different savings levels. For example, if you start with $ 0, lose $ 10,000 a year, and expect it to grow at an average of 8% a year over 25 years, you'll end up with nearly $ 800,000. Try out different scenarios that are realistic for you. Here are a few examples of how you could accumulate the required sum:

Growth of 8% for

Balance on investing $ 5,000 annually

Balance on investing $ 10,000 annually

Balance on investing $ 15,000 annually [19659014] 10 years

$ 78,227

$ 156,455

$ 234,682

15 years

$ 146,621

$ 293,243

$ 439,864

20 years [19659014$247115

$ 494,229

$ 741,344 [19659018] 25 years

$ 394,772

$ 789,544

$ 1.2 million

30 years

$ 611,729

$ 1.2 million

$ 1.8 million

Source: Author's calculations

2. Consult a Financial Advisor

All of the above considerations can be daunting, and rightly so, because this is so important. If you are outside your comfort zone, you might want to use the expertise of a finance professional. (Yes, financial professionals will withhold something from you, but in the end you will save and earn much more than you pay.) But do not go with anyone. Inquire about strong credentials and, instead of a pro, choose a pure fee planner that may have conflicts of interest, such as commissions you earn by selling certain products. Napfa.org has some local pros.

  On a blackboard there are four words pointing to the next: earning, saving, investing, retiring

Source: Getty Images

3. Benefit from Pension Accounts

To maximize your retirement savings, save as much money as possible and invest as aggressively as possible without sleeping. Benefit from tax-advantaged retirement accounts such as IRAs and 401 (k) s. Each of them comes in two variants: traditional or Roth. With a traditional IRA or 401 (k), you make pre-tax money and reduce your taxable income (and thus your tax burden) in the year in which you make the contribution. For example, if you have a taxable income of $ 75,000 and contribute $ 5,000, your taxable income will fall to $ 70,000 for the year. The money grows on your account and when you retire it is taxed at your normal income tax rate – which is often lower than your current rate.

With a Roth IRA or 401 (k), you contribute postal tax money that does not reduce your taxable income in the contribution year. Your taxable income remains $ 75,000 for the year.) Here's the big advantage of a Roth IRA or 401 (k) is a big deal, though: your money can grow on the account When and when you retire it, it is not taxed at all.

For 2018, the IRA contribution limit is $ 5,500 – plus $ 1,000 for over 50s. 401 (k) accounts enjoy far greater contribution limits for the year 2018 of $ 18,500, plus an additional $ 6,000 for those 50 and up. You can open IRA accounts at most major brokerage houses and many other financial services companies. If you can afford to save more than these limits, you can open up a regular, taxable account through good negotiation. Make sure you maximize your tax-deductible savings before turning to a taxable account.

. 4 Remember Your Health

One of your most important considerations in your retirement planning should be your health. A 65-year-old couple retiring today will spend an average of $ 280,000 on health care per Fidelity Investments. (That's an average, of course – that means you may spend less or more.) Be sure you save enough to cover the healthcare. Smart Medicare-related moves can help too.

The goal is to stay as healthy as possible – starting now. The healthier you are in retirement, the less money you will probably spend on healthcare, and the more you will enjoy your golden days. Plan to stay active and socially retired. Being active can strengthen your bones and your heart as you socially keep you mentally and physically healthier and even keep dementia at bay.

Many retired people find themselves bored, restless or lonely. The work routine is more important to some of us than we realize. Prepare for it and think about how to handle it – perhaps by taking on a part-time job or taking up new hobbies. Get ready for some adjustments.

. 5 Make Smart Social Security Decisions

Finally, you should know that you can pretty much control how much money you withhold from Social Security. Namely, you can always claim retirement pensions between the ages of 62 and 70, and the longer you wait, the bigger your monthly checks will be. The bonus you receive for waiting (or the cut you receive for early submission) depends in part on your full retirement age, which is 66 or 67 years for most early retirees today. Read strategies to maximize your social security, especially by coordinating your actions with those of your spouse when you are married. For example, a good strategy for many married people is to gather the spouse's benefits with the lower life-income record on time or early while delaying the benefits of the higher earning spouse. In this way, the couple earns extra income early on, and when the better man reaches 70, he can collect extra large checks. If this higher-earning spouse dies first, the spouse with the smaller salary statement can collect these larger benefits.

If you take some time to develop a healthy retirement plan and you do it well, you can end up with a much more comfortable and secure retirement.

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