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5 Retirement Tips for 2018 -- and Beyond

Retirement is a milestone many Americans look forward to, but the more prepared you are going into it, the more fulfilling it's likely to be. No matter when you're planning to retire, these tips will help you make the most of your golden years.

1. Go in with as much savings as possible

There's no magic savings number that guarantees you'll be financially secure once you stop working, but as a general rule, more money in retirement is always better than less. That's why you should always strive to increase your retirement plan contributions up until the point when you've truly maxed out.

Currently, workers under 50 can save up to $18,500 annually in a 401(k) and $5,500 in an IRA, while those 50 and over can sock away up to $24,500 in a 401(k) and $6,500 in an IRA. Come 2019, all of these limits will increase by $500.

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Even if you're already saving nicely, adding an extra $100 a month to your nest egg over a five-year period will result in an additional $6,900 in savings, provided your investments generate an average annual 7% return during that time. Now that may not seem like a life-changing amount, but if you find yourself on the hook for a major home or auto repair early on in retirement, it could help alleviate a fair amount of financial stress.

2. Understand Social Security's limitations

The purpose of Social Security, in a nutshell, is to protect seniors from full-fledged poverty. And while those benefits can pay for some expenses, they're not enough to allow the average senior to live comfortably.

Social Security will generally manage to replace about 40% of the average earner's pre-retirement income. Most seniors, however, need more like 70% to 80% of their former earnings to have money for luxuries like cable, leisure, and the occasional restaurant meal. Therefore, if you're looking to enjoy your golden years, be realistic about Social Security's role in your retirement, and take steps to secure additional income sources, whether by saving aggressively in an IRA or 401(k), buying an annuity, or renting out your home.

3. Secure a side hustle

When we think of the folks who work side hustles, we tend to imagine millennials more so than soon-to-be retirees, or full-fledged retirees. The reality, however, is that many seniors learn the hard way that retirement is more expensive than anticipated, and a good way to keep up with its costs is to go in with a part-time job already lined up. This way, you'll have the option to work in some capacity to generate income.

Keep in mind that that job doesn't have to be a boring or grueling one. You can start your own business if there's an idea you've always wanted to pursue, or turn a hobby you enjoy into a money-making venture. The point, however, is that it's wise to enter retirement with a means of earning money should you need it.

4. Be tax-aware

Many people go into retirement assuming they won't have to worry about taxes. Not so. Chances are, much of your retirement income will be subject to taxes in some shape or form, and if you don't plan accordingly, you might struggle to meet your IRS obligations.

For one thing, all traditional IRA or 401(k) withdrawals are taxed as ordinary income. This holds true whether you take those withdrawals because you want to, or because you're trying to meet your required minimum distribution mandate. Similarly, any earnings you collect from a job will be taxable, as will your Social Security benefits (though if those benefits are your sole source of income, you might avoid taxes on them). Read up on the taxes seniors generally pay so you're not caught off-guard when the IRS wants its money from you.

5. Know what you'll do with your time

There's a reason retirees are 40% more likely than workers to suffer from clinical depression: Having no structure whatsoever can leave you feeling like you have no purpose in life, and being bored out of your mind is certainly no good way to live.

That's why it's so important to come up with a plan for how you'll spend your days before making the leap into full-fledged retirement. Perhaps you'll take classes, travel, or sink some time into running a small business. Or maybe you'll dive into the home renovations you've been putting off for years. It doesn't really matter what you intend to do with your time as long as you go in with a solid idea of how to live meaningfully in the absence of a full-time job.

Retirement can be a rewarding period of life, but a challenging one as well. With any luck, these tips will help you transition into your new lifestyle while avoiding unpleasant financial surprises.

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