Here’s Your Re­tire­ment Countdown

Calhoun Times - - FRONT PAGE -

to start a “re­tire­ment countdown” well be­fore you draw your fi­nal pay­check.

What might such a countdown look like? Here are a few ideas:

- Ten years be­fore re­tire­ment – At this stage of your ca­reer, you might be at, or at least near, your peak earn­ing ca­pac­ity. At the same time, your kids may have grown and left the home, and you might even have paid off your mort­gage. All these fac­tors, taken to­gether, may mean that you can af­ford to “max out” on your IRA and your 401( k) or other em­ploy­er­spon­sored re­tire­ment plan. And that’s ex­actly what you should do, if you can, be­cause these re­tire­ment ac­counts of­fer tax ben­e­fits and the op­por­tu­nity to spread your dol­lars around a va­ri­ety of in­vest­ments.

- Five years be­fore re­tire­ment – Re­view your So­cial Se­cu­rity state­ment to see how much you can ex­pect to re­ceive each month at var­i­ous ages. You can typ­i­cally start col­lect­ing ben­e­fits as early as 62, but your monthly checks will be sig­nif­i­cantly larger if you wait un­til your “full” re­tire­ment age, which will likely be 66 (and a few months) or 67. Your pay­ments will be big­ger still if you can af­ford to wait un­til 70, at which point your ben­e­fits reach their ceil­ing. In any case, you’ll need to weigh sev­eral fac­tors – your health, your fam­ily history of longevity, your other sources of re­tire­ment in­come – be­fore de­cid­ing on when to start tak­ing So­cial Se­cu­rity.

- One to three years be­fore re­tire­ment – To help in­crease your in­come stream dur­ing re­tire­ment, you may want to con­vert some – but likely not all – of your growth- ori­ented in­vest­ments, such as stocks and stock- based ve­hi­cles, into in­come­pro­duc­ing ones, such as bonds. Keep in mind, though, that even dur­ing your re­tire­ment years, you’ll still likely need your port­fo­lio to pro­vide you with some growth po­ten­tial to help keep you ahead of in­fla­tion.

- One year be­fore re­tire­ment – Eval­u­ate your re­tire­ment in­come and ex­penses. It’s par­tic­u­larly im­por­tant that you as­sess your health- care costs. De­pend­ing on your age at re­tire­ment, you may be el­i­gi­ble for Medi­care, but you will likely need to pay for some sup­ple­men­tal cov­er­age as well, so you will need to bud­get for this.

Also, as you get closer to your ac­tual re­tire­ment date, you will need to de­ter­mine an ap­pro­pri­ate with­drawal rate for your in­vest­ments. How much should you take each year from your IRA, 401( k) and other re­tire­ment ac­counts? The an­swer de­pends on many fac­tors: the size of these ac­counts, your re­tire­ment l i f es­tyle, your pro­jected longevity, whether you’ve started tak­ing So­cial Se­cu­rity, whether your spouse is still work­ing, and so on. A fi­nan­cial pro­fes­sional can help you de­ter­mine an ap­pro­pri­ate with­drawal rate.

These aren’t the only steps you need to take be­fore re­tire­ment, nor do they need to be taken in the pre­cise or­der de­scribed above. But they can be use­ful as guide­lines for a re­tire­ment countdown that can help ease your tran­si­tion to the next phase of your life.

This ar­ti­cle was writ­ten by Ed­ward Jones for use by your lo­cal Ed­ward Jones Fi­nan­cial Ad­vi­sor.

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