Daly Andersson, vice president & private wealth advisor, Busey Wealth Management shares tips for project happy retirement.
From traveling the globe and buying a dream car to spending more time with the grandkids, you have dreams for retirement.
For retirees, the majority are living them—with 56% very satisfied with retirement and 34% moderately satisfied, according to the “Health & Retirement Study” by the University of Michigan. Surprisingly, only 9% are dissatisfied.
1: Although the percentage is small, why would retirees be “dissatisfied?”
It’s important to note the survey doesn’t pinpoint the cause. However, unhappiness may stem from financial worries.
According to the U.S. Government Accountability Office’s “Retirement Security” survey:
41% of households headed by someone aged 55-64 have no retirement savings
Only about a third of them have a traditional pension
Among households in this age group with savings, the median amount was just $104,000
2: How can consumers project a happy retirement?
Busey suggests the following three steps to project a happy retirement—ensuring you’re among the 56% very satisfied in your golden years:
1. Develop a realistic picture.
a. How do you envision retirement based on expected resources and expenses?
b. Create a simple retirement planning worksheet. You can add details once you get the basics down on paper.
2. Estimate income and expenses.
a. Use a percentage of your current income as a starting point—anywhere from 60 to 90 percent or more—depending on your retirement goals.
i. Crunch the numbers and assess your odds of being able to retire on the schedule you envision with financial calculators on busey.com.
b. Project your retirement expenses.
i. Common expenses include: food & clothing, housing, utilities, insurance & health care costs.
ii. Don’t forget the cost of living will go up over time. The average annual rate of inflation over the past 20 years has been approximately 2.5 percent, according to the Consumer Price Index.
c. Consider additional income sources. For example, pensions and Social Security, as well as personal savings or other sources.
3. Take strategic steps.
a. There are several options available to help prepare for retirement.
i. Individual Retirement Accounts (IRAs)
1. Traditional IRAs allow your investment earnings to grow tax-deferred until withdrawn.
2. Roth IRAs are taxed at time of contribution, but earnings can be withdrawn tax-free.
a. Roth IRA owners must be 59 ½ or older and have held the IRA for five years before tax-free withdrawals are permitted.
ii. Employee Benefit Plans
1. 401(k)s allow you to contribute money, most often pre-tax.
a. Sometimes these plans are proportionately matched by your employer.
b. If offered, experts recommend contributing at least enough to take full advantage of the match.
2. Profit-Sharing gives employees the opportunity to invest in the company.
a. Employees receive a percentage of the company’s earnings/profits.
3. Employee Stock Ownership Plans (ESOPs), which is similar to profit-sharing plans, allow employees to purchase company stock.
a. A company sets up a trust fund, into which it contributes new shares of its own stock or cash to buy existing shares.
Additional financial education tools and resources can be found on busey.com, look under Resource Center and click on Financial Education Tools.
Also, you’ll find online calculators, planning checklists, budget worksheets and more.
Visit any Busey location, call 1.800.67 l Busey or visit busey.com today.