Why you need to start preparing for your retirement now

With retirement just around the corner for many baby boomers, the time to start preparing for your retirement is now. You've worked hard your whole life for this moment, and you need to make sure that all your ducks are in a row so you can live the retirement lifestyle you've always dreamed of.  To help make sure your retirement is everything you've hoped for, Tribute Homes, a new home builder specializing in active adult communities throughout the Carolina, has put together this article explaining the importance of preparing for your retirement now.

Determine what kind of retirement lifestyle you can afford

One of the trickiest aspects of transitioning from working full time to retirement is the idea that you’ll be living off of your savings. While everyone’s retirement picture is different, there are some guidelines that most financial advisers recommend when planning for retirement. 

First, you’ll need to figure that you’ll only be living on 70 to 80 percent of your pre-retirement income. Since you won’t be commuting, and won’t need to regularly replace your work clothes, this reduction in income is somewhat offset by a reduction in your work-related expenses. Additionally, you’ll want to be sure that you don’t outlive your retirement savings, so you should overestimate the number of years you’ll require an income.

Once you know how much income you have to work with, you can start to figure out the lifestyle you can afford, i.e., develop your retirement budget. Ask yourself questions like: Do you want to buy a second home, or move into a retirement community? How often do you plan to travel? How will you deal with unexpected medical expense? Are you still providing financial support for your children? All of these are good questions to start thinking of now. If you find that your budget isn't balancing like you hoped, it’s easier to make adjustments before retirement — while you still have time to adjust — than to wait until you’re already living off your retirement savings.

Avoid penalties on your retirement savings

Some retirement accounts have minimum required distributions that you have to make to avoid incurring penalties. For example, as of 2012, IRAs require that you begin withdrawing money when you reach the age of 70.5 at a rate of roughly 3.6 percent per year. You’ll also want to sit down with you financial adviser to discuss how you should start re-balancing your investments as you get closer to retirement. You may be able to avoid capital gains taxes, or otherwise maximize your total account value by making adjustments early on. You don’t want to get into a situation where you’re forced to liquidate assets at less-than-desirable costs or penalties. 

Plan for major purchases and expenses

Many retirees choose to move into an active adult community, or buy a vacation home to spend part of the year at. Planning for major purchases well-before you enter retirement will help you determine the timing of certain expenses to make sure you can comfortably afford these purchases. You’ll also want to plan for health care costs, which are increasing at a rate of approximately 6 percent per year. You may be shocked to learn that a 62-year-old couple that lives to 92 years old will spend approximately $400,000 in health care costs (excluding long-term care costs). You can read more about health care costs during retirement here. 

While there are plenty of other good reasons to start planning for your retirement now, they all come to the same conclusion: it’s better to look ahead and prepare than to look back and regret.

If you’re considering moving to an active adult community, you should consider one of Tribute Homes’ new home developments in South Carolina. We've built everything with the active adult in mind, and we know you’ll love the time spent on the lake, playing golf, or relaxing with your new friends. To learn more, visit us online at www.tributehomesusa.com or call us directly at 800-381-2984.