Things To Know About Retirement
Whether you’re approaching retirement or are just thinking about and planning for it, here are some things you should know:
• Withdrawal strategies: You’ll need a plan for how much you’ll withdraw from your nest egg each year in order to make it last. If the
market and your portfolio’s value sink just before you retire, consider delaying retirement, or withdraw a smaller amount. Try to keep several years’ worth of living expenses in cash or low-volatility, accessible accounts to tap during bear markets or recessions.
• RMDs: Once you turn 72, you’ll need to start taking required
minimum distributions from certain retirement accounts, such as traditional (non-Roth) IRAs. Fail to do so, and the penalty is huge — 50% of the sum you failed to withdraw on time. (These withdrawals will generally count as taxable income.)
• Health care: Prepare to pay a lot to health care providers. Fidelity Investments has estimated that
the average 65-year-old oppositegender couple retiring in 2022 will spend $315,000 on medical expenses throughout their retirements (excluding long-term care, most dental care and over-thecounter drugs). Getting and staying as healthy as possible might keep those expenses down for you.
• Other expenses: While you might spend a lot on health care, you’ll likely spend less on many other items as you slow down, such as commuting, clothing and even travel. Your housing costs
may drop, too, if your mortgage is paid off or if you move to a smaller home or lower-cost location.
• Daily life: Big swaths of free time may be enticing, but many find themselves restless or even depressed in retirement. Prepare to combat that by staying active, learning new things, engaging in activities you enjoy and socializing. Exercising regularly, volunteering or working a low-stress job can also help.
• A bigger standard deduction: One nice thing about getting older
is that those 65 or older get a bigger standard deduction come tax time. Learn more about retirement at
Fool.com and elsewhere, and enter it prepared.