My husband and I have been married for 25 years. We do not have children together, but he has children from a previous marriage.
We are retired now, and he bought property in Florida for us to live in. My name is not on the deed of the property, and he has not made a will yet. I keep complaining to him about it.
If he should die without a will, will his adult children and grandchildren be entitled to the property and house? Hopefully, you will be able to answer this question and set my mind at ease.
Carla
Dear Carla,
Your husband appears to have control issues at worst or, at best, problems with being direct and transparent. This is not the way to deal with a family property, especially after 25 years of marriage. If your husband wants his children to inherit his estate when he is gone, he should discuss it with you like a man (or woman), face to face, and you should outline a plan for your future together. But this game of cat and mouse, where he makes unilateral decisions about your future, is not a respectful or helpful way to conduct a 25-year marriage.
Not knowing if youâre going to have a place to live after your husband dies, assuming he predeceases you, creates a constant feeling of unease. The whole point of saving for retirement and being fortunate enough to retire comfortably is that you can see out your final years together with the knowledge that you will both be financially secure. Only one person in this relationship knows what that feels like â and, given that you have raised this issue with him, he is aware that you do not enjoy that same peace of mind.
Florida is an equitable distribution state and, for the most part, divides property 50/50. Hereâs the legal interpretation from Schnauss Naugle Law in Jacksonville, Fla.: âIf the decedentâs homestead property was titled in the decedentâs name alone, and if the decedent was survived by a spouse and descendants, the surviving spouse will have the use of the homestead property for his or her lifetime only (or a life estate), with the decedentâs descendants to receive the decedentsâ homestead property only after the surviving spouse dies.â
You will have the right to live in this property for the remainder of your life. If you divorce, however, anything purchased during your marriage is considered marital property, and even though this home was purchased in your husbandâs name only, it would be divided 50/50. In Florida, âequitable distributionâ is mostly treated as âequal distribution.â According to this interpretation of family law in Florida by Arwani Law: âEven if he purchases the car with his own money and puts the car title in his wifeâs name, it is still considered marital property.â
And as most lawyers will tell you, a lack of communication is one way of buying a ticket to divorce.
The post My Husband Bought a Retirement Property, but Only Put His Name on the Deed. Will His Adult Children Inherit This Home? appeared first on Real Estate News & Insights | realtor.com®.
We are in the midst of a major economic shift. While workers in the past could expect to keep a stable job with a traditional employer for decades, workers of today have found they must either cobble together a career from a variety of gigs, or supplement a lackluster salary from a traditional job by doing freelance work in their spare time.
Though you can make a living (and possibly even a good one) in the gig economy, this kind of work does leave gig workers vulnerable in one very important way: retirement planning.
Without the backing of an employer-sponsored retirement account, many gig workers are not saving enough for their golden years. According to a recent report by Betterment, seven out of 10 full-time gig workers say they are unprepared to maintain their current lifestyle during retirement, while three out of 10 say they don’t regularly set aside any money for retirement.
So what’s a gig worker to do if they don’t want to be driving for Uber and taking TaskRabbit jobs into their 70s and 80s? Here are five things you can do to save for retirement as a member of the gig economy. (See also: 15 Lucrative Side Hustles for City Dwellers)
1. Take stock of what you have
Many people don’t have a clear idea of how much money they have. And it’s impossible to plan your retirement if you don’t know where you are today. So any retirement savings should start with a look at what you already have in the accounts in your name.
Add up how much is in your checking and savings accounts, any neglected retirement accounts you may have picked up from previous traditional jobs, cash on hand if your gig work relies on cash tips, or any other financial accounts. The sum total could add up to more than you realize if you haven’t recently taken stock of where you are.
Even if you truly have nothing more than pocket lint and a couple quarters to your name, it’s better to know where you are than proceed without a clear picture of your financial reality. (See also: These 13 Numbers Are Crucial to Understanding Your Finances)
2. Open an IRA
If you don’t already have a retirement account that you can contribute to, then you need to set one up ASAP. You can’t save for retirement if you don’t have an account to put money in.
IRAs are specifically created for individual investors and you can easily get started with one online. If you have money from a 401(k) to roll over, you have more options available to you, as some IRAs have a minimum investment amount (typically $1,000). If you have less than that to open your account, you may want to choose a Roth IRA, since those often have no minimums.
The difference between the traditional IRA and the Roth IRA is how taxes are levied. With a traditional IRA, you can fund the account with pre-tax income. In other words, every dollar you put in an IRA is a dollar you do not have to claim as income. However, you will have to pay ordinary income tax on your IRA distributions once you reach retirement. Roth IRAs are funded with money that has already been taxed, so you can take distributions tax-free in retirement.
Many gig workers choose a Roth IRA because their current tax burden is low. If you anticipate earning more over the course of your career, using a Roth IRA for retirement investments can protect you from the taxman in retirement.
Whether you choose a Roth or a traditional IRA, the contribution limit per year, as of 2018, is $5,500 for workers under 50, and $6,500 for anyone who is 50+.
3. Avoid the bite of investment fees
While no investor wants to lose portfolio growth to fees, it’s especially important for gig workers to choose asset allocations that will minimize investment fees. That’s because gig workers are likely to have less money to invest, so every dollar needs to be working hard for them.
Investing in index funds is one good way to make sure investment fees don’t suck the life out of your retirement account. Index funds are mutual funds that are constructed to mimic a specific market index, like the S&P 500. Since there is no portfolio manager who is choosing investments, there is no management fee for index funds. (See also: How to Start Investing With Just $100)
4. Embrace automation
One of the toughest challenges of being a gig worker is the fact that your income is variable — which makes it very difficult to plan on contributing the same amount each month. This is where technology comes in.
To start, set up an automatic transfer of an amount of money you will not miss. Whether you can spare $50 per week or $5 per month, having a small amount of money quietly moving into your IRA gives you a little cushion that you don’t have to think about.
From there, consider using a savings app to handle retirement savings for you. For instance, Digit will analyze your checking account’s inflow and outflow, and will determine an amount that is safe to save without triggering an overdraft, and automatically move that amount into a savings account. You can then transfer your Digit savings into your retirement account.
5. Invest found money
An excellent way to make sure you’re maxing out your contributions each year is to change your view of "found money." For instance, if you receive a birthday check from your grandmother, only spend half of it and put the rest in your retirement account. Similarly, if you receive a tax refund (which is a little less likely if you’re a gig worker paying quarterly estimated taxes), send at least half of the refund toward your retirement.
Any gig workers who often receive cash can also make their own rules about the cash they receive. For instance, you could decide that every $5 bill you get has to go into retirement savings. That will help you change your view of the money and give you a way to boost your retirement savings.
If you’re thinking about how much is enough for retirement, you’re probably contemplating a retirement and need to know how to pay for it. If you are, that’s good because one of the challenges we face is how we’re going to fund our retirement.
Determining then how much retirement savings is enough depends on a number of factors, including your lifestyle and your current income. Either way, you want to make sure that you have plenty of money in your retirement savings so you don’t work too hard, or work at all, during your golden years.
If you’re already thinking about retirement and you’re not sure whether your savings is in good shape, it may make sense to speak with a financial advisor to help you set up a savings plan.
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How Much Is Enough For Retirement?
Your needs and expectations might be different in retirement than others. Because of that, there’s no magic number out there. In other words, how much is enough for retirement depends on a myriad of personal factors.
However, the conventional wisdom out there is that you should have $1 million to $1.5 million, or that your retirement savings should be 10 to 12 times your current income.
Even $1 million may not be enough to retire comfortably. According to a report from a major personal finance website, GoBankingRates, you could easily blow $1 million in as little as 12 years.
GoBankingRates concludes that a better way to figure out how long $1 million will last you largely depends on your state. For example, if you live in California, the report found, “$1 Million will last you 14 years, 3 months, 7 days.” Whereas if you live in Mississippi, “$1 Million will last you 23 years, 2 months, 2 days.” In other words, how much is enough for retirement largely depends on the state you reside.
For some, coming up with that much money to retire comfortably can be scary, especially if you haven’t saved any money for retirement, or, if your savings is not where it’s supposed to be.
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How to Become a 401(k) Millionaire
Early Retirement: 7 Steps to Retire Early
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Your current lifestyle and expected lifestyle?
What is your current lifestyle? To determine how much you need to save for retirement, you should determine how much your expenses are currently now and whether you intend to keep the current lifestyle during retirement.
So, if you’re making $110,000 and live off of $90,000, then multiply $90,000 by 20 ($1,800,000). With that number in mind, start working toward a retirement saving goals. However, if you intend to eat and spend lavishly during retirement, then you’ll obviously have to save more. And the same is true if you intend to reduce your expenses during retirement: you can save less money now.
The best way to start saving for retirement is to contribute to a tax-advantaged retirement account. It can be a Roth IRA, a traditional IRA or a 401(k) account. A 401k account should be your best choice, because the amount you can contribute every year is much more than a Roth IRA and traditional IRA.
1. See if you can max out your 401k. If you’re lucky enough to have a 401k plan at your job, you should contribute to it or max it out if you’re able to. The contribution limit for a 401k plan if you’re under 50 years old is $19,000 in 2019. If you’re funding a Roth IRA or a traditional IRA, the limit is $6,000. For more information, see How to Become a 401(k) Millionaire.
2. Automate your retirement savings. If you’re contributing to an employer 401k plan, that money automatically gets deducted from your paycheck. But if you’re funding a Roth IRA or a traditional IRA, you have to do it yourself. So set up an automatic deposit for your retirement account from a savings account. If your employer offers direct deposit, you can have a portion of your paycheck deposited directly into that savings account.
Related: The Best 5 Places For Your Savings Account.
Life expectancy
How long do you expect to live? Have your parents or grandparents lived through 80’s or 90’s or 100’s? If so, there is a chance you might live longer in retirement if you’re in good health. Therefore, you need to adjust your savings goal higher.
Consider seeking financial advice.
Saving money for retirement may not be your strong suit. Therefore, you may need to work with a financial advisor to boost your retirement income. For example, if you have a lot of money sitting in your retirement savings account, a financial advisor can help with investment options.
Bottom Line:
Figuring out how much is enough for retirement depends on how much retirement will cost you and what lifestyle you intend to have. Once you know the answer to these two questions, you can start working towards your savings goal.
How much money you will need in retirement? Use this retirement calculator below to determine whether you are on tract and determine how much you’ll need to save a month.
More on retirement:
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Working With The Right Financial Advisor
You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is paying off debt, investing, buying a house, planning for retirement, saving, etc). Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
The post How Much Is Enough For Retirement? appeared first on GrowthRapidly.
My wife and I are looking to retire in three years from New Jersey to Florida or a Florida-type atmosphere â warm weather, no snow!
We will be getting around $5,000 from Social Security monthly and will have a little over $1 million spread among savings/401(k)/house equity. We want to buy a condo for about $250,000 that has all the extras like pools, restaurants, social activities and near the beach.
Can you make any suggestions?
Thanks,
Marty
Dear Marty,
With 1,350 miles of coastline in Florida alone, never mind the rest of the South, you have many possibilities for your retirement. But as you can imagine, properties closest to the beach are more expensive, so ânear the beachâ may involve some compromise.
I started my search with Realtor.com (which, like MarketWatch, is owned by News Corp.) and its picks of affordable beach communities, but didnât stick to it exclusively.
My three suggestions are just a starting point. No place is perfect, not every development will have all the amenities you want, and every town has its own personality, so you may want to think about what else is important to you. You also may want to consider gated communities and townhomes, not just multistory condominium buildings.
As you narrow down your list, I recommend you visit at least twice â once in the winter to experience the crowds in high season and once in the summer to understand what southern humidity is like. Itâs worse than in New Jersey.
Think about how you will build your new social network, even with all the social amenities in your condo building. Donât rule out the local senior center or the townâs recreation department.
Consider renting for the first year to test it out to make sure youâve picked the right area.
Then there are the money questions. The last thing you need is a surprise.
Youâll have condo fees; they can be quite high, particularly in a high-rise building along the beach. What do they cover and what donât they cover? How much have fees been rising over, say, the past 10 years? How does the board budget for bigger repairs? More broadly, are you OK with the condo associationâs rules?
Ask about the cost of both flood and wind insurance given that the southern coastline is regularly threatened with hurricanes. Thatâs on top of homeownerâs insurance. Or are you far enough inland that you can get away without them?
Walk into the tax assessorâs office to try for a more accurate tax assessment than your real-estate agent may give you. And since this would be your primary residence, ask about the homestead exemption.
And donât forget that youâre trading your New Jersey heating bill for more months of air conditioning; what will that cost?
Finally, three years isnât that far away. Start decluttering now. Thatâs hard work, too.
Here are three coastal towns to get you started on your search:
Venice, Florida
Venice Beach pier
frankpeters/iStock
This town of nearly 25,000 on the Gulf Coast is part of the Sarasota metro area, deemed by U.S. News & World Report to be the best area in the U.S. to retire. Venice is 25 miles south of Sarasota and its big-city amenities; itâs 60 miles north of Fort Myers, the runner-up in the U.S. News listing.
It also made Realtor.comâs list of affordable beach towns for 2020.
This is a retiree haven â 62% of residents are 65 and over, according to Census Bureau data.
While you can always travel to the nearby big cities, when you want to stay local, see whatâs on at the Venice Performing Arts Center and the Venice Theatre. Walk or bicycle along the 10.7-mile Legacy Trail toward Sarasota and the connecting 8.6-mile Venetian Waterway Park Trail to the south. The latter will lead you to highly ratedCaspersen Beach.
Temperature-wise, youâll have an average high of 72 in January (with overnight lows averaging 51) and an average high of 92 in August (with an overnight low of 74).
Hereâs what is on the market right now, using Realtor.com listings.
Boynton Beach, Florida
Boynton Beach condos
Carl VMAStudios/Courtesy The Palm Beaches
On the opposite side of the state, smack between Palm Beach and Boca Raton, is this city of about 80,000 people, plenty of whom are from the tri-state area. More than one in five are 65 or older.
Weather is similar to that in Venice: an average high of 73 in January and 85 in August.
Boynton Beach is in the middle of developing the 16-acre Town Square project that will include a cultural center and residential options, among other things. Still, this is an area where one town bleeds into the next, so whatever you donât find in Boynton Beach, youâll probably find next door.
At the western edge of town is the Arthur R. Marshall Loxahatchee National Wildlife Refuge, 145,000 acres of northern Everglades and cypress swamp. The Green Cay Nature Center is another natural attraction.
You can also hop Tri-Rail, a commuter train line that runs from West Palm Beach to the Miami airport with a stop in Boynton Beach, when you want to go elsewhere. The fancier Brightline train is adding a stop in Boca Raton to its existing trio of West Palm Beach, Fort Lauderdale and Miami; the current plan is for a mid-2022 opening.
This city has many amenity-laden retirement communities, and the median listing price for condos and townhouses fit your budget, according to Realtor.com data. Hereâs whatâs on the market now.
Myrtle Beach, South Carolina
Myrtle Beach, FL
Kruck20/iStock
If youâre ready to look beyond Florida, Myrtle Beach, S.C., with nearly 35,000 people, made Realtor.comâs 2018 and 2019 lists of affordable beach towns, and Murrells Inlet, just to the south and home to just under 10,000 people, made the 2020 list. The broader Myrtle Beach area, known as the Grand Strand, extends for 60 miles along the coast.
Summer temperatures in Myrtle Beach are a touch cooler than Florida; an average high of 88 in July, with lows averaging 74.
A word of warning: In the winter, average overnight lows get down to around 40, and average daytime highs reach the upper 50s. Is that acceptable, or too cold?
Myrtle Beach boasts of its low property taxes, especially when combined with the stateâs homestead exemption. While you may think of the city as a vacation destination, 20% of residents are 65 or older. (Nearly 32% of Murrells Inlet residents are seniors.)
Hereâs whatâs for sale now in Myrtle Beach and in Murrells Inlet.
The post We Want to Retire to Florida or a Florida-Type Atmosphere and Buy a Condo With Lots of Amenities for $250,000âWhere Should We Go? appeared first on Real Estate News & Insights | realtor.com®.
The time has finally come: youâre ready to retire. For many, this means living off savings or social security, but in reality, now that youâre unemployed itâs time you started making real money. Investing after retirement is a great way to continue making income, cover expenses in lieu of a regular paycheck, and stay plugged into the booming American economy.
Social security is drying up
If you plan on retiring any time after the next 20 years, you shouldnât count on social security funds. A 2014 report estimates that social security will no longer be able to pay full benefits after 2033. This means that those that retire after this demarcation point should expect to supplement federal aid with individual income â such as investments.
Life expectancy is increasing
Clean living, improved healthcare resources, increased social awareness, and many other factors have all contributed to a steady increase in life expectancy over the years. Today, being young at heart means more than ever â retirees can expect to live an additional 15 – 20 years into their twilight years. The average life expectancy today is 80, which is almost a decade older than the to 71 year life expectancy of 1960.
Investing is fun
Many retirees will take up new hobbies to fill the time previously occupied by professional obligations. Why not make your daytime hobby making money? Day trading stocks is the perfect retiree activity because itâs just as complicated as you want it to be. You can trade casually, and pick up some minor gains here or there. Or, go in full bore and make it your new job. After all, investments provide extra money, so have some fun with it.
Delaying social security payments boosts your benefits
Letâs say your investments are performing exceptionally well, and maybe you donât necessarily need social security yet. Your social security payout increases by 8 percent for every year you delay payments. So if youâve held off on social security, and it has come time to cash out investments, your federal retirement benefits will be worth far more than usual.
Moving
Want to spend the next chapter of your life in Myrtle Beach? Naples, Florida? Now that youâre retired, youâre free to live anywhere you want â unfettered by professional constraints, the world is your oyster. But thereâs one problem: how will you afford it? Your savings account should be preserved for medical expenses, and you already checked the couch cushions for loose change. Well, investments with high yield interest rates or dividend payments are a good way to boost your income and gain a little extra cash.
You earned it
What has decades of penny pinching amounted to if you canât spend your savings during retirement? Part of the reason you budgeted so carefully in your professional years is to ensure security as you grow old. Well, here you are, and itâs time to tap that sacred savings account. As you assess your finances in old age, consider how much savings youâre willing to gamble on the market â what do you have to lose?
Thereâs no better time to invest than now
This is not to say that the market is particularly ripe for new investors right now â although 2017 saw record high economic numbers â but more so that anytime is a good time to invest. You can guarantee the market will fluctuate in your 15+ years of retirement, but thatâs not the point. As long as you build a portfolio that can bear a bear market, you will be in good shape to weather market slumps. As they say, âdonât play with scared money.â
Grandchildren
Your kids are all grown up, but that doesnât mean youâre off the hook. As a retired grandparent, youâre in charge of vacations, dinners out, movie nights, and other fun activities with the grandkids. And, you guessed it, one of the best ways to bankroll fun money is through thriving investments. In fact, while it might not be the most exciting prospect for the kid, a safe, slow-maturing investment is a great grandkid birthday gift.
Jumpstart a startup
Are you passionate about the future of tech? Small philanthropies? Artisan dog treats? Whatever your calling may be, there is likely a startup that you can help get off the ground. One study found that 100 million startups try to get off the ground every year, and they need your help. Invest in a cause you care about, and in the process make someoneâs entrepreneurial dreams come true.
Broaden your horizons
Now that youâre retired itâs time to read those books you never got around to, learn a new skill, travel the world, and, most importantly, diversify your portfolio. Financial experts suggest that retirees pursue many different types of assets to help offsite potential market volatility.
Travel
For most, vacation tops the list of most anticipated retirement activities. Itâs easy to get swept up in fantasies of cold beer and catching rays on the beach, but you you need a way to pay for it. Investments are a good way to compound your savings, and make a little extra vacation money.
Health
Studies show that retirees require upwards of $260,000 to cover medical expenses as they age. Maybe, thanks to years of frugality, you have this kind of money in savings, but it never hurts to stash away a little extra cash. The population nearing retirement needs to be able to expect the unexpected, so use the stock market as an opportunity to compound your emergency fund in case of expensive medical bills.
Taxes
Just because youâre retired doesnât mean you can avoid the taxman â after all, according to Benjamin Franklin, alongside death, taxes are one of the two certainties in life. While you no longer have to pay payroll taxes, you will still pay taxes on social security benefits. Plus, you are required to pay taxes on IRA withdrawals. Tax season can feel extra overwhelming if you are without a reliable source of income, so avoid the April financial crunch and tap investment gains to pay taxes during retirement.
Support a company you care about
If youâre on the verge of retirement you probably had a long, prosperous career. Maybe you jumped around to different positions, or maybe you logged a couple decades at one company. Either way, chances are there is a company you want to be involved with that you never got a chance to work at. Investing in a company is a good way to gain a sense of belonging, and do your part to support a company dear to your heart â even if you never actually worked there.
Stay sharp on market trends
All of the financial benefits of investments aside, investing in the market gives you a reason to care. One of the scariest prospects of retirement is the threat of complacency, so fend off apathy by giving yourself a reason to stay up-to-date. You are far more likely to take a keen interest in economic trends when you have a little skin in the game.
If youâre concerned about your credit, you can check your three credit reports for free once a year. To track your credit more regularly, Credit.comâs free Credit Report Card is an easy-to-understand breakdown of your credit report information that uses letter gradesâplus you get a free credit score updated every 14 days.
You can also carry on the conversation on our social media platforms. Like and follow us on Facebook and leave us a tweet on Twitter.
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The post 15 Reasons to Invest After Retirement appeared first on Credit.com.
Iâm 51 years old and donât have a large nest egg. Iâm a single parent with three kids. Iâm a second career middle school teacher, so there is not a lot of money left over each month.Â
How much money should I be saving to be able to retire in my 70s? Where should I invest that money?
-B.
Dear B.,
You still have 20 years to build your nest egg if all goes as planned. Sure, youâve missed out on the extra years of compounding youâd have gotten had you accumulated substantial savings in your 20s and 30s. But thatâs not uncommon. Iâve gotten plenty of letters from people in their 50s or 60s with nothing saved who are asking how they can retire next year.
I like that youâre already planning to work longer to make up for a late start. But hereâs my nagging concern: What if you canât work into your 70s?
The unfortunate reality is that a lot of workers are forced to retire early for a host of reasons. They lose their jobs, or they have to stop for health reasons or to care for a family member. So itâs essential to have a Plan B should you need to leave the workforce earlier than youâd hoped.
Retirement planning naturally comes with a ton of uncertainty. But since I donât know what you earn, whether you have debt or how much you have saved, Iâm going to have to respond to your question about how much to save with the vague and unsatisfying answer of: âAs much as you can.â
Perhaps I can be more helpful if we work backward here. Instead of talking about how much you need to save, letâs talk about how much you need to retire. You can set savings goals from there.
The standard advice is that you need to replace about 70% to 80% of your pre-retirement income. Of course, if you can retire without a mortgage or any other debt, you could err on the lower side â perhaps even less.
For the average worker, Social Security benefits will replace about 40% of income. If youâre able to work for another two decades and get your maximum benefit at age 70, you can probably count on your benefit replacing substantially more. Your benefit will be up to 76% higher if you can delay until youâre 70 instead of claiming as early as possible at 62. That can make an enormous difference when youâre lacking in savings.
But since a Plan B is essential here, letâs only assume that your Social Security benefits will provide 40%. So you need at least enough savings to cover 30%.
If you have a retirement plan through your job with an employer match, getting that full contribution is your No. 1 goal. Once youâve done that, try to max out your Roth IRA contribution. Since youâre over 50, you can contribute $7,000 in 2021, but for people younger than 50, the limit is $6,000.
If you maxed out your contributions under the current limits by investing $583 a month and earn 7% returns, youâd have $185,000 after 15 years. Do that for 20 years and youâd have a little more than $300,000. The benefit to saving in a Roth IRA is that the money will be tax-free when you retire.
The traditional rule of thumb is that you want to limit your retirement withdrawals to 4% each year to avoid outliving your savings. But that rule assumes youâll be retired for 30 years. Of course, the longer you work and avoid tapping into your savings, the more you can withdraw later on.
Choosing what to invest in doesnât need to be complicated. If you open an IRA through a major brokerage, they can use algorithms to automatically invest your money based on your age and when you want to retire.
By now youâre probably asking: How am I supposed to do all that as a single mom with a teacherâs salary? It pains me to say this, but yours may be a situation where even the most extreme budgeting isnât enough to make your paycheck stretch as far as it needs to go. You may need to look at ways to earn additional income. Could you use the summertime or at least one weekend day each week to make extra money? Some teachers earn extra money by doing online tutoring or teaching English as a second language virtually, for example.
I hate even suggesting that. Anyone who teaches middle school truly deserves their time off. But unfortunately, I canât change the fact that we underpay teachers. I want a solution for you that doesnât involve working forever. That may mean you have to work more now.
Robin Hartill is a certified financial planner and a senior editor at The Penny Hoarder. Send your tricky money questions to AskPenny@thepennyhoarder.com.
This was originally published on The Penny Hoarder, which helps millions of readers worldwide earn and save money by sharing unique job opportunities, personal stories, freebies and more. The Inc. 5000 ranked The Penny Hoarder as the fastest-growing private media company in the U.S. in 2017.
Can you retire at 50? On average, people usually retire at 65. But what if you want to retire 15 years earlier than that like at 50? Is it doable? Below are 10 easy steps to take to retire at 50. Retiring early can be challenging. Therefore, SmartAsset’s free tool can match you with  a financial advisor who can help to work out and implement a retirement income strategy for you to maximize your money.
10 Easy & Simple Steps to Retire at 50:
1. How much you will need in retirement.
The first thing to consider is to determine how much you will need to retire at 50. This will vary depending on the lifestyle you want to have during retirement. If you desire a lavish one, you will certainly need a lot.
But according to a study by SmartAsset, 500k was found to be enough money to retire comfortably. But again that will depends on several factor.
For example, you will need to take into account where you want to live, the cost of living, how long you expect to live, etc.
Read: Can I Retire at 60 With 500k? Is It Enough?
A good way to know if 500k is possible to retire on is to consider the 4% rule. This rule is used to figure out how much a retiree should withdraw from his or her retirement account.
The 4% rule states that the money in your retirement savings account should last you through 30 years of retirement if you take out 4% of your retirement portfolio annually and then adjust each year thereafter for inflation.
So, if you plan on retiring at 50 with 500k for 30 years, using the 4% rule you will need to live on $20,000 a year.Â
Again, this is just an estimation out there. You may need less or more depending on the factors mentioned above. For example, if you’re in good health and expect to live 40+ years after retiring at 50, $500,000 may not be enough to retire on. That’s why it’s crucial to work with a financial advisor.
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2. Maximize your tax-advantaged retirement accounts.
Once you have an idea of how much you need in order to retire at 50, your next step is to save as much as possible at a faster rate. If you are employed and you have a 401k plan available to you, you should definitely participate in it. Nothing can grow your retirement savings account faster than a 401k account.
See: How to Become a 401k Millionaire.
That means, you will need to maximize your 401k contributions, for example. In 2020, and for people under 50, the 401k contribution limit is $19,500. Also, take advantage of your company match if your employee offers a match.
In addition to the maximum contribution of $19,500, your employer also contributes. Sometimes, they match dollar for dollar or 50 cents for each dollar the worker pays in.
In addition to a 401k plan, open or maximize your Roth or traditional IRA. For an IRA, it is $6,000. So, by maximizing your retirement accounts every year, your money will grow faster.
3. Invest in mutual or index funds. Apart from your retirement accounts (401k, Roth or Traditional IRA, SEP IRA, etc), you should invest in individual stocks or preferably in mutual funds.Â
4. Cut out unnecessary expenses.
Someone with the goal of retiring at 50 needs to keep an eye on their spending and keep them as low as possible. We all know the phrase, “the best way to save money is to spend less.”
Well, this is true when it comes to retiring 15 years early than the average. So, if you don’t watch TV, cancel Netflix or cable TV. If your cell phone bill is high, change plans or switch to another carrier. Don’t go to lavish vacations.
5. Keep an eye on taxes.
Taxes can eat away your profit. The more you can save from taxes, the more money you will have. Retirement accounts are a good way to save on taxes. Besides your company 401k plan, open a Roth or Traditional IRA.
6. Make more money.
Spending less is a great way to save money. But increasing your income is even better. If you need to retire at 50, you’ll need to be more aggressive. And the more money you earn, the more you will be able to save. And the faster you can reach your early retirement goal.
7. Speak with a financial advisor.
Consulting with a financial advisor can help you create a plan to. More specifically, a financial advisor specializing in retirement planning can help you achieve your goals of retiring at 50. They can help put in a place an investment strategy to put you in the right track to retire at 50. You can easily find one in your local area by using SmartAsset’s free tool. It matches users with financial advisors in just under 5 minutes.
8. Decide how you will spend your time in retirement.
If you will spend a lot of time travelling during retirement, then make sure you do research. Some countries like the Dominican Republic, Mexico, Panama, the Philippines, and so many others are good places to travel to in retirement because the cost of living is relatively cheap.
While other countries in Europe can be very expensive to travel to, which can eat away your retirement money. If you decide to downsize or sell your home, you can free up more money to spend.
9. Financing the first 10 years.
There is a penalty of 10% if you cash out your retirement accounts before you reach the age of 59 1/2. Therefore, if you retire at 50, you’ll need to use money in other accounts like traditional savings or brokerage accounts.
10.Put your Bonus, Raise, & Tax Refunds towards your retirement savings.
If retiring at 50 years old is really your goal, then you should put all extra money towards your retirement savings. That means, if you receive a raise at work, put some of it towards your savings account.
If you get a tax refund or a bonus, use some of that money towards your retirement savings account. They can add up quickly and make retiring at 50 more of a reality than a dream.
Retiring at 50: The Bottom Line:
So can I retire at 50? Retiring at 50 is possible. However, it’s not easy. After all, you’re trying to grow more money in less time. So, it will be challenging and will involve years of sacrifices, years living below your means and making tough financial decisions. However, it will be worth it in the long run.
Read More:
How Much Is Enough For Retirement
How to Grow Your 401k Account
People Who Retire Comfortably Avoid These Financial Advisor Mistakes
5 Simple Warning Signs Youâre Definitely Not Ready for Retirement
Speak with the Right Financial Advisor
You can talk to a financial advisor who can review your finances and help you reach your goals (whether it is making more money, paying off debt, investing, buying a house, planning to retire at 50, saving, etc). Find one who meets your needs with SmartAssetâs free financial advisor matching service. You answer a few questions and they match you with up to three financial advisors in your area. So, if you want help developing a plan to reach your financial goals, get started now.
The post How To Retire At 50: 10 Easy Steps To Consider appeared first on GrowthRapidly.
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