Planning for Retirement


Many of us will spend 20 years or more in retirement. That's about half the time of our working years. For some, retirement might be working less but having more time to take advantage of outside hobbies and leisure activities... or start that new business venture. For many, it may mean moving to a different part of the country or traveling. The choice is up to you. Proper planning will allow you to live the retirement lifestyle you desire. How you handle your personal and financial affairs today will determine what you can do tomorrow.

Like it or not, a greater portion of your retirement income will come from what you've saved. If you're not a saver, you may be putting your future financial security in jeopardy. Where will your retirement income come from?

Retirement sources of income have often been compared to a three-legged stool. The first leg of that stool is your Social Security. The second leg is your employer's pension plan. And the third leg is your personal savings. How much you depend on the third leg depends on the strength of the other two. But one thing is for sure. Your future financial security will depend on all three.

The strength of each leg may change, and then you'll need a new plan of action to reinforce the retirement stool. Specifically, it will require you to be more educated about financial matters. It will take more discipline and planning to keep that stool strong.

Here are some myths about retirement planning to think about and guide you toward better planning decisions.

Myth #1: When I retire, I'll need a fixed-income for 10 to 15 years. People are living longer. When planning for your retirement, assume you will be living to at least age 85 or longer.

Myth #2: My living expenses will be lower. Are you sure your mortgage will be paid off by the time you retire? Will you still be supporting your children and possibly your parents? You'll still have to pay everyday expenses such as electric bills, insurance, etc. Inflation will increase the cost of food, clothing and health care. And while your work-related expenses may go down, your leisure expenses may increase.

Myth #3: Social Security will be a substantial portion of my retirement income... and it won't be taxed. Quite the contrary, you should never count on Social Security to replace a substantial portion of your pre-retirement earnings. Also, if you have a good pension and substantial income-producing assets when you retire, there is a strong likelihood that a good portion of your Social Security retirement benefits will be taxed.

Myth #4: I'll be in a lower tax bracket. If you've done a good job in building your retirement assets, there's a good chance your income won't drop that much after you retire. That means there's a good chance you'll remain in the same tax bracket you are today.

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