Can I afford to retire?
Most of us are looking forward to retirement. But the transition can be filled with challenging financial questions – questions for which you may not have all the answers.
For years, when thinking of retirement, the mantra has been, “Save, save, save.” Paying down or eliminating debt is also important. But as retirement time draws closer, you should ask yourself if your nest egg is big enough to retire at the desired time, how much you would be able to spend if you do retire, and whether you should convert some of your savings into an annuity.
For many Americans about to retire, having enough money to maintain living standards has become more difficult. According to The Center for Retirement Research, the national retirement risk index shows that 45 percent of Americans are on track to fall short, by 10 percent or more, of the goal of replacing about 3/4 of their pre-retirement income after retirement.
The reasons for this trend are that people are living longer, outliving their savings; there are fewer guaranteed pensions; low rates of personal savings; and the cost of health care is ever rising. These trends make it difficult to build savings for retirement, and create uncertainty about when retirement can occur.
Before jumping into the deep end of the retirement pool, take a look at your spending habits, and think about how well your retirement income will cover those expenses. Is your mortgage paid off? What are your costs for real estate taxes? What about maintenance on your home? How much are you planning to spend on “extra” things like gifts for children and grandchildren?
Many Americans plan to retire at 65, but in some cases, it is wiser to wait a few years. You can collect full Social Security benefits at age 67, and will thus have fewer years to fund in retirement, if you retire later.
Financial experts agree that you should draw no more than 4 percent of your financial assets during your first year of retirement. After that, the amount can increase with the rate of inflation. Sticking with 4 percent generally gives people enough to live on and ensures that their retirement will last as long as they live.
Social Security is the most reliable income for most retirees. But many supplement that with savings from a variety of other sources. That may include a mix of stock or stock mutual funds and fixed income instruments. Using a chunk of your nest egg to buy a fixed annuity can guarantee a stream of income for life and can provide a measure of certainty in an overall plan. But experts caution that it’s good to wait until you’ve been retired for a period of time first, in order to monitor your income and expenses.
Your home is a major portion of your wealth. Downsizing to a smaller residence in retirement can provide additional funds for retirees. If finances become tight, a reverse mortgage can provide homeowners with steady income in exchange for declining equity in the home.
Retirement involves more than just money. It also involves living your dreams of traveling, spending time with family and doing the things you never had time for while working. And starting with a solid financial plan can help make your retirement dreams come true.
Helping your parents with estate planning
When you were growing up, did your parents ever tell you that your bad behavior could get you written out of their will? Sure, they may have been joking, but until we all grew up and realized they were joking, it was a pretty effective parenting tool.
For most of us, as kids we just knew that a will was something that our parents didn’t really talk about a lot, but we understood that it meant they would someday hand down things to us and other people they cared about.
These days, most surveys indicate that the majority of Americans rarely discuss 
with their parents. In most cases, adult children have no idea what their parents would want them to do with their “worldly goods” if Mom and Dad were to become incapacitated.
The reasons people create wills are simple: they want to pass on their assets to their family members, rather than let the government get it, they want to keep peace in the family by making decisions about who gets what ahead of time, and they want to plan ahead for the costs of health care should they become incapacitated.
But what if your parents aren’t prepared? If you suspect this is the case, you should broach the subject with them. But how?
Begin the conversation with telling your parents that you want to understand what they want. Ask specific questions about who they want to receive property, how they want their assets divided or spent, and whether they’ve thought about how to avoid high taxes and lengthy probate.
You should make sure to acknowledge that you understand that this is their money you’re talking about. Help them to understand that advance planning means they can maintain control.
Stay focused on your parents’ concerns and remember that this is about them – not your needs or wants. They may be struggling with finding a fair way of dividing up what they’ll leave behind, and would rather not confront these issues. If they are uncomfortable talking with you, recommend they talk with a financial planner.
One way to help them is to talk about your own experience in setting up a will or estate planning. Share with them what you’ve learned, and you could create openings for discussion.
However you go about it, get the conversation started. Tread carefully in bringing this up with your parents. Your motive should be entirely about helping them meet their own needs and wishes. Remember: an inheritance, if you receive one, is a gift, not a right.
Avoiding Estate Planning Mishaps
The bad news: when it comes to your assets, mistakes you make in estate planning can cost you plenty.
The good news: with a little planning, such mistakes can be easily avoided.
So avoid these major estate planning mistakes when it comes to your finances:
Mistake #1: Incorrectly Giving Away Property- Estate planning experts say this no-no is all too common in remarried households. Let’s say a father wants his home to go to a child from his second marriage. To do that, he makes a provision in his will stating his intention. Read more