Four Things to Do If You Are Planning to Retire in 2020
For people who are contemplating retiring from work or have fixed a date to call it a day, the most common time to do so is either during the early summer or the springtime. Taking retirement is not an easy task as it might seem. There are a few strategic decisions that you need to take. You need to take into account a lot of significant issues, and that includes money matters. After taking all the major steps, you are finally ready to take your leave. However, before you call upon your friends and throw a retirement party, you must keep the following things in mind.
Don’t Miss out on Your Free Money
All the time, you have been an employee entitles you to your employer’s contributions to your retirement plans. Since you have to be on your toes on the date this payment is due, you need to ensure that you know the basics before you set a retirement date for yourself. Why? Because you simply can’t leave your money on the table and go home!
You might want to accentuate your contribution percentage from your side to reach the annual maximum. Several employers put a cap on your contribution from your monthly paycheck. Since you can’t take your contribution rate up to 100%, you might require accentuating the contribution percentage much before you leave work for good to maximize the sum. Calculation of the benefits that you get from your pension is based on your earnings history.
Refresh Your Risk Profile
Retirement is one of the major decisions that you take in life. It’s not only about having a major change in your life. Your life will be transforming from that of a full-time or part-time employee to an individual in retirement. It’s also a transition from being a saver to a spender. You might have made certain investments in your work life. Well, rebalancing those investments is always suggested.
However, maintaining that balance in your retirement phase is a tough task. Since you will be drawing out a lump sum from your savings account to finance your retirement phase, you should not dig deeper into riskier assets. In a situation of a potential downturn, the market might crash, and in turn, you will become more vulnerable.
Have a Discussion With Your Spouse
Retirement is all about entering a new phase of life where many pleasant, as well as unpleasant things, might be waiting for you. You can turn your free time into some hours of meaningful activity. That’s a better option than just sitting idle and doing nothing. However, several people used to give hours at their offices and now are at their wit’s end about how to covert those hours into something constructive. Now, what are the options that you have? Getting involved in household chores, travel abroad, volunteer? Discuss with your spouse and make a good plan to make sure that these golden years do not go to waste.
Don’t Underpay Your Taxes
While you were an employee, taxes were withheld from your paycheck by your employer. However, the reverse is true post-retirement. In this phase, taxes are not automatically withheld from the income you have now. What you have to do is opt to have the tax amount get withheld from your pension benefits, Social Security benefits, as well as IRA/401(k) distributions.
In case you don’t do that, a certain amount of tax payments will become an integral part of your life. In case of federal taxes, you would have to shell out $22k every year. If you fail to do so, you might have to pay underpayment penalties of something around $500.
Retirement is one of the milestones of your life. You have to make all the necessary arrangements and be completely ready for it. Ask a professional financial expert regarding how to manage your money matters. Do not forget to talk to your spouse and take suggestions from your close ones on how to spend your days in retirement. Don’t lack clarity in any situation since a lack of it might pose problems. The last thing you want in your retirement is to worry about all the things you could have done right while you had the time.
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