Some of us aren’t the greatest at planning ahead, and perhaps nowhere will this shortcoming be more evident than retirement and old age. People are living longer every year. Don’t be shocked if you wake up one morning to 100 candles on your birthday cake. If you happened to retire at 65, that’s a full 35 years of living you must be able to afford! Fully one-third of your life needs to be financed by wise financial decisions made in the first two-thirds.
Sounds like a lot of pressure when you think of it like that, but don’t collapse in a weeping heap of despair just yet. We’re going to give you a few pointers that could go a long ways towards making the coming Golden Years truly golden. Here we go.
1. Defer Taxes on Savings: This might be the most important idea of all. Your money grows ever so much faster during working years when you’re not paying taxes on it. You can defer income tax on up to $17,000 annually by investing through a 401k, 403b, or the Federal government’s Thrift Savings Plan. Even a plain old IRA lets you invest up to $5,000 each year without paying taxes on it. Trust us, it’s MUCH better to pay taxes on the back end rather than the front.
2. Minimize Fees: The worst part about investing in traditional stocks, bonds, or mutual funds is the administrative fees. The saying “not able to see the forest for the trees” comes to mind. Imagine a seemingly lowly 1% fee per year. After a quarter of a century you’ve sacrificed a full 25% of your nest egg. Crazy! If you insist on Wall Street investing, seek out financial firms with the lowest costs, and beware of brokers who churn your account in order to generate transactions costs. Even better would be to take control of your future and create a portfolio without a middleman stealing your profits each and every year. Jason Hartman can show you how to become a world class income property specialist in less time than you might think.
3. Maximize Social Security: The following theory assumes Social Security will still be there during your lifetime. While many are tempted to chuck the working world the moment they qualify for Social Security, you should postpone taking payments as long as possible, until the age of 70 if you can. Your monthly check increases each year you don’t take it between the ages of 62 and 70.
There you have it. Three solid ways to insure you don’t outlive your retirement.
The Heroic Investing Team
Flickr / Sami Keinanen